Fraud is one of the great "unmentionables" of business.  Everyone knows it's there but few talk about it.

Fraud victims are "ashamed" that it happened to them; the loss reflects a lack of business "control" in the eye of the public.  Perhaps that's why most frauds go unreported. 

Several annual studies are made of fraud.  The latest studies conclude that:

• Small businesses lose an estimated 7% of their annual revenue to fraud.
  

• The typical fraudster is a trusted employee with nearly five years of service to the organization
  

• Employees with some type of accounting responsibilities steal more often than other employees
  

• The average fraud scheme goes undetected for over two years
  

• Most fraud schemes are exposed through chance - usually a tip or an accidental observation
  

• The most common categories of small-business fraud schemes are
  
  • check tampering
    
  • fraudulent billing
    
  • corruption

• Most fraudsters are first-time offenders.  Fewer than 10% had prior records

• Nearly 40% of major frauds were committed by employees who earned less than $50,000 per year
  

Because fraud is concealed theft, and because most frauds go unreported, the above numbers are best-guesses.  Actual numbers may be larger or smaller and may, in fact, be indeterminate.

Since the majority of small-business fraud schemes are perpetrated by employees, the first page of this tutorial describes internal fraud schemes.  A second page of the tutorial describes the external fraud schemes that are perpetrated by outsiders.