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JFC
16,1 An analysis of the victims
of occupational fraud:
a Canadian perspective
60
Dominic Peltier-Rivest
Department of Accountancy, John Molson School of Business,
Concordia University, Montréal, Canada

Abstract
Purpose – This paper aims to describe and explain characteristics of organizations that are victims
of occupational fraud.
Design/methodology/approach – This study is based on a 2006 occupational fraud web survey
conducted in Canada by the Association of Certified Fraud Examiners (ACFE).
Findings – The analysis shows that occupational fraud losses are quite large, accounting for a
median loss of C$187,500 and a mean loss of C$1,142,494. These losses represent, respectively, 0.3
percent (median) and 9 percent (mean) of the victim organization’s annual sales. Private companies,
not-for-profit organizations and small businesses are particularly vulnerable to relatively larger fraud
losses. It is also shown that the smaller the organization the more likely fraud losses will be relatively
larger.
Research limitations/implications – This study contributes to academia by measuring the
statistical significance of the cost of occupational fraud per various organizational characteristics.
Practical implications – This study is useful to regulatory agencies and anti-fraud professionals
because it provides information about what types of organizations are more vulnerable to fraud, thus
indicating where prevention and detection efforts should be directed.
Originality/value – This paper is based on proprietary data owned by the ACFE and is the first to
analyze the statistical significance of the consequences (cost) of occupational fraud in Canada.
Keywords Fraud, Canada, Corporate finances, Regulation
Paper type Research paper

Journal of Financial Crime
Vol. 16 No. 1, 2009
pp. 60-66
q Emerald Group Publishing Limited
1359-0790
DOI 10.1108/13590790910924966
Introduction
Most industrialized countries have experienced a flurry of occupational fraud cases
lately, including the Enron, WorldCom, Societe Generale, and the Parmalat frauds, just
to name a few. Occupational fraud may be defined as “the use of one’s occupation for
personal enrichment through the deliberate misuse or misapplication of the employing
organization’s resources or assets” (ACFE and Peltier-Rivest, 2007). Any fraud
committed by an employee, a manager or executive, or by the owner of an organization
where the victim is the organization itself may be considered “occupational fraud”
(sometimes called “internal fraud”).
This study describes and explains characteristics of organizations that are victims
of occupational fraud. It contributes to regulatory agencies, anti-fraud professionals,
and academics by describing what types of organizations are more vulnerable to fraud,
The author would like to thank the Government of Québec (Fonds de recherche sur la société et la
culture – FQRSC) for its financial support and the Association of Certified Fraud Examiners
(ACFE) for providing the data.
thus raising general awareness about the cost of occupational fraud and prevention The victims of
and detection efforts needed to curb it. occupational
The paper is based on data collected by the Association of Certified Fraud
Examiners (ACFE) through a web survey adapted by Peltier-Rivest and the ACFE. fraud
The survey was distributed to Canadian members of the ACFE in March 2006. Each
survey respondent was asked to provide detailed information about his or her largest
investigation that met the following four criteria: 61
(1) the case involved occupational fraud;
(2) the case was investigated after January 2004;
(3) the investigation of the fraud was completed; and
(4) the ACFE member was reasonably sure the perpetrator had been identified.

A complete descriptive report was published by the ACFE and Peltier-Rivest (2007) on
the survey results.
This paper shows that the median fraud loss is C$187,500 and the mean fraud loss is
C$1,142,494, which represent, respectively, 0.3 and 9 percent of the victim
organization’s annual sales. While asset misappropriations are the most frequent
schemes, fraudulent financial statements are the most costly, with a median loss of
$1,075,000 and a mean loss of C$2,499,300. The results also suggest that private
companies and not-for-profit organizations suffer relatively larger fraud losses, with a
median (mean) loss of, respectively, 7 percent (11 percent) and 11 percent (14 percent) of
their annual sales. Finally, the results indicate that organizations employing fewer than
100 employees sustain fraud losses representing a median of 11 percent of their sales
and a mean of 19 percent of their sales. Analyses also show that the smaller the
organization the more likely fraud losses will be relatively larger.
The next section of this paper describes results and analyzes the characteristics of
victim organizations, while the last section offers a conclusion.

Results
Descriptive results
The study sample comprises 90 completed cases of occupational fraud investigated in
Canada after January 2004. The results in Table I show that the median fraud loss per
individual case is C$187,500 while the mean fraud loss is C$1,142,494. Once deflated by
the total number of company employees, this is equivalent to a median loss of C$535
per employee and a mean loss of C$71,895 per employee. On a per-dollar-of-annual-sale
basis, companies experience a median loss of 0.3 percent of their annual gross sales and
a mean loss of 9 percent of gross sales for a single case of occupational fraud. These

Fraud loss Median Mean

Fraud loss per case C$187,500 * C$1,142,494 * *

Fraud loss per employee C$535 * C$71,895 * *
Fraud loss per C$ sale C$0.003 * C$0.09 * *
Table I.
Notes: *Using a signed rank test, the median loss is statistically greater than zero at p level ,0.05; Descriptive statistics:
* *using a t-test, the mean loss is statistically greater than zero at p level ,0.05 fraud losses
JFC numbers are statistically significant at the 0.05 p level, whether using a t-test or a
16,1 non-parametric Wilcoxon signed rank test. The results clearly demonstrate the serious
economic impact of occupational fraud on victim organizations, especially considering
that these numbers are not cumulative, i.e. they only represent one typical fraud case,
and they do not include undetected fraud.
Table II shows the loss distribution of the 90 cases of occupational fraud analyzed
62 as well as the magnitude of the losses. For example, 64.5 percent of all fraud cases
resulted in a loss of C$100,000 or more for the victim organization, while 25.6 percent of
cases triggered losses of C$1,000,000 or more.
Categories of fraud. Table III illustrates the different categories of fraud sustained
by victim organizations. While asset misappropriations are more frequent (90 percent
of all cases) than other fraud schemes, they generate a smaller median loss (C$200,000)
and mean loss (C$1,024,509) than other fraud schemes. Fraudulent financial statements
are the least frequent schemes (11.1 percent of all cases) but the most costly to victim
organizations, with a median loss of C$1,075,000 and a mean loss of C$2,499,300.
Finally, corruption cases (i.e. bribery, illegal gratuities, extortion, or conflicts of
interest) occur 38.9 percent of the time and trigger financial damages for a median loss
of C$250,000 and a mean loss of C$1,160,320.These results are all statistically
significant at the 0.05 p level.
Asset misappropriations – cash vs non-cash. Table IV takes a closer look at asset
misappropriation schemes. Cash schemes, such as cash larceny, skimming, or
fraudulent disbursements (e.g. billing schemes, payroll fraud, check tampering, and
expense reimbursement frauds), account for 86.4 percent of all asset misappropriation
cases, with a median loss of C$198,500 and a mean loss of C$908,217. Non-cash schemes,
such as theft of inventory, equipment, proprietary information, or securities, represent
one-third (33.3 percent) of asset misappropriations and produce slightly smaller losses
than cash schemes. Every statistic in Table IV is significant at the 0.05 p level.

Fraud loss per case Frequency Percentage Median Mean

C$1,000-C$9,999 6 6.7 C$3,850 C$4,717

C$10,000-C$49,999 14 15.5 C$25,000 C$27,642
C$50,000-C$99,999 12 13.3 C$67,500 C$65,183
Table II. C$100,000-C$499,999 27 30.0 C$195,000 C$205,333
Distribution of losses for C$500,000-C$999,999 8 8.9 C$577,500 C$626,215
the 90 fraud cases C$1,000,000 and more 23 25.6 C$2,200,000 C$3,959,706

Category Frequency Percentagea Median loss Mean loss

Asset misappropriations 81 90.0 C$200,000 * C$1,024,509 * *

Corruption 35 38.9 C$250,000 * C$1,160,320 * *
Fraudulent statements 10 11.1 C$1,075,000 * C$2,499,300 * *
Table III. Notes: *Using a signed rank test, the median loss is statistically greater than zero at p level ,0.05;
Descriptive statistics: * *using a t-test, the mean loss is statistically greater than zero at p level ,0.05; athe sum of percentages in
categories of fraud this table exceeds 100 percent because several cases involved schemes that fell into more than one category
Characteristics of victim organizations The victims of
Types of organizations. Table V shows that the most frequent victims of occupational occupational
fraud are private companies (38.2 percent of all cases), followed by government entities
(28.1 percent) and public companies (23.6 percent). The median loss and mean loss fraud
suffered by private companies are the largest, at C$253,500 and C$1,594,139,
respectively. The mean loss of public companies is also quite large at C$1,439,157. The
results in Table V are all statistically significant except for the mean loss of 63
not-for-profit organizations, which may be explained by the small number of
observations (9) for this category.
Table VI shows that the median (mean) fraud loss sustained by private companies is
equivalent to 7 percent (11 percent) of their annual gross sales, as compared to 0.04 percent
(8 percent) for government entities, 0.03 percent (5 percent) for public companies and
11 percent (14 percent) for not-for-profit organizations. These percentages of sales are all
statistically significant and, even though calculated from a single case of fraud, suggest
that private companies and not-for-profit organizations suffer disproportionately larger
fraud losses than their government or public counterparts. The results underscore the
critical damages (more than 10 percent of annual sales on average) that a single case of

Asset misappropriated Frequency Percentagea Median loss Mean loss

Cash 70 86.4 C$198,500 * C$908,217 * *

Non-cash 27 33.3 C$100,000 * C$718,893 * *
Table IV.
Notes: *Using a signed rank test, the median loss is statistically greater than zero at p level ,0.05; Descriptive statistics:
* *using a t-test, the mean loss is statistically greater than zero at p level ,0.05; athe sum of percentages in asset misappropriations
this chart exceeds 100 percent because some cases involved schemes that fell into more than one category – cash vs non-cash

Organization type Frequency Percentage Median loss Mean loss

Private 34 38.2 C$253,500 * C$1,594,139 * *

Government 25 28.1 C$150,000 * C$471,377 * *
Public 21 23.6 C$150,000 * C$1,439,157 * *
Not-for-profit 9 10.1 C$72,000 * C$346,333
Table V.
Notes: *Using a signed rank test, the median loss is statistically greater than zero at p level ,0.05; Victims of occupational
* *using a t-test, the mean loss is statistically greater than zero at p level ,0.05 fraud: organization types

Organization type Frequency Percentage Median loss/sales Mean loss/sales

Private 34 38.2 C$0.07 * C$0.11 * *

Government 25 28.1 C$0.0004 * C$0.08 * *
Public 21 23.6 C$0.0003 * C$0.05 * *
Not-for-profit 9 10.1 C$0.11 * C$0.14 * * Table VI.
Victims of occupational
Notes: *Using a signed rank test, the median loss is statistically greater than zero at p level ,0.05; fraud: fraud loss as a
* *using a t-test, the mean loss is statistically greater than zero at p level ,0.05 percentage of sales
JFC fraud may have on the financial conditions of private companies and not-for-profit
16,1 organizations.
Industries. The results reported in Tables VII and VIII are preliminary because of
the small number of observations within each industry, but they show that although
manufacturing companies are targeted by occupational fraudsters in 8.9 percent of the
cases, they sustain very large losses, with a median fraud loss of C$1,375,000 and a
64 mean fraud loss of C$2,307,750. These two numbers are statistically significant at the
0.05 p level, and represent, respectively, 0.1 and 11 percent of the victim manufacturing
company’s annual sales. The retail industry also sustains relatively large fraud losses
that account for a median percentage of sales of 0.01 percent and a mean percentage of
sales of 14 percent.
Size of victim organizations. Tables IX and X analyze the effect of organizational
size on the frequency and amount of fraud losses. They illustrate that small
organizations, i.e. those with fewer than 100 employees, are extremely vulnerable to

Industry Frequency Percentage Median loss Mean loss

Government and public administration 12 13.3 C$84,500 * C$425,536 * *

Retail 10 11.1 C$236,000 * C$1,491,410
Banking and financial services 9 10.0 C$197,000 * C$2,164,111
Manufacturing 8 8.9 C$1,375,000 * C$2,307,750 * *
Oil and gas 6 6.7 C$522,000 * C$1,212,000
Service (other) 6 6.7 C$28,000 * C$63,500 * *
Health care 5 5.6 C$200,000 * C$515,000
Insurance 5 5.6 C$100,000 * C$204,000 * *
Service (professional, scientific, or technical) 5 5.6 C$1,000,000 * C$4,405,000
Transportation and warehousing 5 5.6 C$900,000 * C$731,200 * *
Utilities 5 5.6 C$55,000 * C$182,944
Table VII.
Victims of occupational Notes: *Using a signed rank test, the median loss is statistically greater than zero at p level ,0.05;
fraud: industries * *using a t-test, the mean loss is statistically greater than zero at p level ,0.05

Median Mean
Industry Frequency Percentage loss/sales loss/sales

Government and public administration 12 13.3 C$0.001 * C$0.09

Retail 10 11.1 C$0.001 * C$0.14 * *
Banking and financial services 9 10.0 C$0.001 C$0.001
Manufacturing 8 8.9 C$0.001 * C$0.11 * *
Oil and gas 6 6.7 C$0.002 * C$0.01
Service (other) 6 6.7 C$0.09 * C$0.08 * *
Health care 5 5.6 C$0.11 C$0.20
Insurance 5 5.6 C$0.0001 * C$0.02
Service (professional, scientific, or technical) 5 5.6 C$0.15 * C$0.22
Transportation and warehousing 5 5.6 C$0.004 C$0.004
Table VIII.
Utilities 5 5.6 C$0.002 C$0.02
Victims of occupational
fraud: fraud loss as a Notes: *Using a signed rank test, the median loss is statistically greater than zero at p level ,0.05;
percentage of sales * *using a t-test, the mean loss is statistically greater than zero at p level ,0.05
fraud, accounting for 42.2 percent of all fraud cases while providing only 33 percent of The victims of
total jobs in the Canadian economy (Industry Canada, 2005). Small businesses suffer a occupational
median fraud loss of C$150,000 and a mean loss of C$1,188,462, representing,
respectively, 11 and 19 percent of their annual sales. These results reveal their fraud
vulnerability to occupational fraud and are statistically significant at the 0.05 p level.
Smaller organizations may be vulnerable to more and larger fraud because of their
limited financial and human resources available for effective anti-fraud controls, such 65
as segregation of duties and anonymous reporting mechanisms.
On a side note, even though the mean loss of organizations hiring between 100 and
999 employees is quite large at C$1,730,683, it represents only 5 percent of their annual
sales. The same is valid for organizations with more than 10,000 employees. These
very large entities sustain a mean fraud loss of 0.2 percent of sales.
Finally, Table XI confirms the statistically significant negative correlation between
organizational size and the relative amount of fraud losses. Whether measuring
organizational size by annual gross sales or by total number of employees, the
spearman correlation coefficient is statistically significant and negative when deflating
fraud losses by organizational size. Therefore, the smaller the organization the more
likely the fraud loss will be relatively larger.

Number of employees Frequency Percentage Median loss Mean loss

Less than 100 35 42.2 C$150,000 * C$1,188,462 * *

100-999 12 14.5 C$100,000 * C$1,730,683
1,000-9,999 22 26.5 C$209,500 * C$521,914 * *
More than 10,000 14 16.9 C$452,500 * C$1,671,642 * * Table IX.
Victims of occupational
Notes: *Using a signed rank test, the median loss is statistically greater than zero at p level ,0.05; fraud: size of
* *using a t-test, the mean loss is statistically greater than zero at p level ,0.05 organizations

Number of employees Frequency Percentage Median loss/sales Mean loss/sales

Less than 100 35 42.2 C$0.11 * C$0.19 * *

100-999 12 14.5 C$0.01 * C$0.05 * *
1,000-9,999 22 26.5 C$0.0001 * C$0.03
More than 10,000 14 16.9 C$0.0001 * C$0.002 Table X.
Victims of occupational
Notes: *Using a signed rank test, the median loss is statistically greater than zero at p level ,0.05; fraud: fraud loss as a
* *using a t-test, the mean loss is statistically greater than zero at p level ,0.05 percentage of sales

Size Loss Loss/sales Loss/employees

Sales 0.01 2 0.84 * 2 0.72 * Table XI.

Number of employees 0.05 2 0.75 * 2 0.83 * Spearman correlation
coefficients between
Note: *the correlation coefficient is statistically greater than zero at p level ,0.05 fraud loss and size
JFC Conclusions
This study is based on a sample of 90 complete cases of occupational fraud
16,1 investigated in Canada after January 2004. It shows that while the median fraud loss is
C$187,500 and the mean fraud loss is C$1,142,494, private companies, not-for-profit
organizations and businesses with fewer than 100 employees are particularly
vulnerable to relatively larger fraud losses. Private companies sustain fraud losses
66 with a median value of $253,500 and a mean value of C$1,594,139, which represents,
respectively, 7 and 11 percent of their annual sales. Not-for-profit organizations suffer
fraud losses which account for 11 percent (median) and 14 percent (mean) of their
annual sales. Small businesses’ fraud losses have a median value of 11 percent of their
sales and a mean value of 19 percent of their annual sales.
The data analyzed in this paper also indicate that the smaller the organization the
more likely it will sustain relatively larger fraud losses. This may be due to the lack of
sufficient resources needed for effective anti-fraud controls in certain small businesses,
such as separation of key duties, ethics training, and anonymous reporting
mechanisms (hotlines).

References
ACFE and Peltier-Rivest, D. (2007), “Detecting occupational fraud in Canada: a study of its
victims and perpetrators”, Association of Certified Fraud Examiners, Austin, TX, USA,
p. 2.
Industry Canada (2005), The Importance of Small Business in Canada, Government of Canada,
Ottawa, Ontario, November 2.

Corresponding author
Dominic Peltier-Rivest can be contacted at: drivest@jmsb.concordia.ca

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