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Puerto Rico CPA Society: Occupational fraud cost nearly $2 billion in 2018

By on August 9, 2018

SAN JUAN – A Puerto Rico CPA Society survey on occupational fraud in Puerto Rico during 2018 found that internal illicit enrichment is taking a damaging toll on economic growth and must be understood further to address properly.

According to the study, occupational fraud can be classified as asset misappropriation, or the theft of money or misuse of assets; corruption, as in the use of power to obtain a personal benefit; and adulterated or fraudulent financial statements.

“Occupational fraud is a global problem that poses a threat to businesses today. It is a great phenomenon that affects practically every entity, and detecting it represents a challenge for many organizations. Entities of different sizes, from the public and private sectors, have been victims of this type of crime, violating the employer’s trust and causing harsh and severe damage to the economy,” Society President Ramón Ponte Tápanes told the news media.

The president of the association’s Non-Traditional Services Committee, CPA Eduardo González-Green, who led the study, said that the Association of Certified Fraud Examiners and the Institute of Certified Internal Auditors collaborated in the effort to collect and analyze the data for the study, which was based on an online survey.

“In 2006, the CPA Society Foundation conducted a study on occupational fraud in Puerto Rico, limited to the private sector of our economy, and the results were very interesting and useful,” González-Green said. “Unlike the 2006 study, the 2018 study was designed for every organization, including the Government. The total number of people who answered the survey was 281, of which 131 met the established requirements, which was to have experienced or participated in a fraud incident investigation in the past three years, where said investigation has concluded and the perpetrator has been identified.”

The report estimated the cost of occupational fraud in 2018 at about $1.95 billion, “which is equivalent to 2.77% of the gross national product of 2017,” or $70.57 billion, González-Green said. “In the 2006 study, which did not include the government sector, the average loss reported by the participants was 2.2% of the gross product, which is equivalent to a loss from fraud and abuse of approximately $860 million.”

“No one is exempt from this problem, it can happen to any company, to the universities, to the government, to the bank, in short, we must all prepare ourselves to be able to fight it,” Ponte Tápanes stressed.

Based on the findings, the society’s committee highlighted the following conclusions and recommendations:

· The costs of asset misappropriation and corruption were higher than they are stateside.

· Companies with an established system to receive complaints reported fewer losses.

· Cash theft proved to be the most common fraud, thus rigorous accounting controls must be established.

· The main schemes to commit fraud were the creation of fraudulent documents or the alteration of documents, therefore, a pre-intervention system must be established, among other measures.


· Internal audits were the most effective way to stopping fraud.

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