The Puerto Rico College of CPAs will be commissioning the third edition of its occupational fraud study, to determine the impact of the problem on the island, trade group President David González said.
“Occupational fraud is a global problem that represents a threat to companies today. It is a great phenomenon that affects practically each entity and detecting it represents a challenge for many organizations,” he said.
“Companies of different sizes, from the public and private sector, have been victims of this type of financial crime, violating the employer’s confidence and causing a harsh and severe damage to the economy,” González said.
Occupational fraud is defined as acts committed by employees to gain economic benefits through the improper use or illegal appropriation of organizational resources that includes the manipulation of the information contained in the financial statements. There are three classifications of fraud: appropriation of assets, corruption, and adulterated financial statements.
In 2006, the CPA College Foundation conducted the first wide-ranging study on occupational fraud in Puerto Rico but limited it to the private sector. In 2018, the trade group conducted a second study, which included all sectors, including the government.
The results of the studies showed:
- Participants reported average gross income loss due to fraud and abuse of 2.77% in the 2018 study versus 2.2% in the 2006 edition. If this answer is taken as a basis and projected to the economy, the estimated loss due to fraud and abuse was almost $2 billion in 2018.
- The loss reported in Puerto Rico was greater than the loss reported in the U.S. mainland for both the classification of asset appropriation and corruption.
- Cash continues to be the asset preferred by employee-perpetrators.
- The factors that most favor the incidence of fraud are those associated with “internal controls.”
There are three organizations that are collaborating on the task of collecting and analyzing information for this study, said CPA Eduardo González-Green, chairman of the Portrait of Fraud in Puerto Rico 2020 committee and responsible for the new study. They are the Association of Certified Fraud Examiners, the Institute of Internal Auditors, Puerto Rico Chapter, and the Bar Association.
“The main tool of the study will be a questionnaire that is easy and quick to answer. This questionnaire will be used solely and exclusively for this fraud study in Puerto Rico and will be anonymous,” González said.
“The goal is to collect information on occupational fraud in both the private and public sectors and promote measures and guidelines to prevent it,” he said, adding the questionnaire is already online.
“The questionnaire must be answered by those who have experienced and participated in the investigation of an occupational fraud incident in the past two years [from January 2018 to December 2019], where the investigation has already been completed and the perpetrator has been identified. Only one questionnaire must be completed per company or entity,” González said.