2012 Report to the Nations on Occupational Fraud and Abuse

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Dawson, Smith, Purvis & Bassett, PA

Certified Public Accountants

Richard B. Dawson, CPA 15 Casco Street
David E. Smith, CPA Portland, Maine 04101-2902
Eric A. Purvis, CPA/ABV, MST, CVA Tel (207) 874-0355
Joel H. Bassett, CPA/PFS, CMA, CIA Fax (207) 874-0865
Kirk J. Purvis, CPA, CFE www.dspbcpa.com
William H. Souter, CPA, MST
Craig M. Pike, CPA
Adam P. Johnson, CPA
Patricia S. Hodgdon, CPA
Jeremy S. Handlon, CPA
Kevin M. Brunelle, CPA, CVA
Michael P. Kelly, CPA
Karla J. Brannen, CPA

August 1, 2012

Dear Clients and Other Friends:

We have all read numerous newspaper articles in the past few years dealing with employee theft, embezzlement and fraud. Have you considered whether these unfortunate situations could happen to your business or organization?

Recently, the Association of Certified Fraud Examiners (ACFE) released the 2012 Report to the Nations on Occupational Fraud and Abuse, its most recent survey regarding incidents of worldwide fraud. The ACFE’s survey found that the most common type of fraud is through an asset misappropriate scheme such as check tampering or inflated expense reports. The survey also revealed that only 3% of frauds were detected through external audits. Please remember that work performed such as tax return preparation and even financial statement audits are not designed to detect employee theft and should never be considered a safeguard.

We encourage you to consider the internal control structure and fraud prevention techniques in place at your business or organization. If you are a small business owner, or in charge of a non-profit organization, it is imperative for you to be involved with the review of the finances. From our experience, we have found that the entities most susceptible to fraud are those where there is a lack of oversight by management over those involved with the day to day financial activity.

Business owners or non-profit executives can be involved in financial oversight at many different levels. At the very least, high level management should receive bank statements unopened, review the activity and follow up on anything unfamiliar or questionable.

If there is online access only, be diligent in checking the activity regularly. Also, be sure to review monthly bank reconciliations if prepared by others. An appropriate internal control structure can be established in any organization, regardless of size. We encourage you to consider yours and contact us if you need help assessing your current internal control structure. Dawson, Smith, Purvis & Bassett, P.A. is available to assist you in your evaluation process.

Very truly yours,