Fraud carried out by top management causes the most significant losses

fraud top management

Fraud carried out by top management causes the most significant losses

fraud top managementThe degree of loss caused by occupational fraud is strongly tied to the perpetrator’s position. The higher the perpetrator’s position, the larger the potential loss.

Report to the Nations 2022 shows that the level of fraud strongly correlates with the perpetrators’ position. While the percentage of occupational fraud committed by executives is only 23%, which contributes the least compared to other positions, they cause the most significant losses, with a median loss of USD 337,000.

Excellent at evading audits

According to, there are various conditions that allow this to occur. For starters, executive officers have the right to intervene in internal control procedures, such as audits, allowing them to influence the process and its outcomes.

Second, they have the most access to organizational assets and the most exclusive partnerships with third parties. This facilitates fraud.

Third, executives have the capacity to create rules that might block or limit other parties’ abilities to identify fraud committed. The larger the loss, the longer the fraud goes undetected.

Those at the executive level who have worked for more than 10 years in a company have been found to commit fraud, contributing to an average loss of $240,000. This amounts to a loss six times greater than the fraud perpetrated by average workers at a lower level.

Executive-level fraud mitigation

There are several ways for organizations to mitigate the occupational fraud committed by their top management:

  1. Pre-employment background screening. Hiring senior-level employees presents a higher level of challenge in comparison to hiring other employees, as the position plays a strategic role in the company. Bad hiring decisions at the senior level can have a ripple effect not only from a monetary standpoint but also on morale and reputation. Given the tremendous risks, conducting more in-depth background screening for senior-level hires is essential. In pre-employment screening, various kinds of information checks are carried out, one of which is reverse directorship. The reverse directorship check aims to determine the candidate’s previous position in other companies and verify share ownership. The check should also be carried out on every candidate who has ever held a self-employed position. This is intended to avoid potential conflicts of interest.
  2. Post-hire screening. Post-hire screening is as important as pre-employment screening, as it provides employers with a valuable tool to best evaluate the risks of fraud and ensure that they placed the right employees in the right positions.
  3. Whistleblowing system. The whistleblowing system has been shown to be the most effective tool for detecting fraud. Organizations that do not have a hotline system endure median losses that are nearly double those that do, according to various studies. A good whistleblowing system should provide comfort and security whenever employees need to raise questions or concerns. It should be free from all barriers, free to use, easily accessible, and able to facilitate two-way communication with the reporting party.

For more than two decades, our customers from various business backgrounds have trusted Integrity Asia to provide compliance services, which among them are pre-employment background screening, post-hire screening, and Canary Whistleblowing System. By conducting mitigation, your company will be more well-prepared in making hiring decisions and ensuring that your company is less susceptible to potential fraud risk. Contact us now for more information.


Image by Gerd Altmann from Pixabay

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