ACFE Fraud Results
From time to time, I like to revisit the data on how frauds are uncovered in organizations and what can be done to mitigate such behaviors. According to a survey by the Association of Certified Fraud Examiners (ACFE), 2026 Occupational Fraud: A Report to the Nations, a tip is the most common way of reporting fraud (43 percent of reports) and 55% of those tips were from employees in the organization, and over a third (34%) of tips were received from external sources (e.g., customers, vendors, and competitors). Internal audit was next with 15 percent followed by management review with 13 percent. Taken together these results indicate the need for strong internal controls to help prevent and detect fraud. More effective internal audits serve to strengthen internal controls, a goal of Section 404 of the Sarbanes-Oxley Act (SOX). The following shows the frequency of detection methods as reported by respondents to the 2026 ACFE survey.
Initial Detection of Occupational Frauds from the ACFE 2026 Survey: Report to the Nations
| Detection Method | Percentage Reported | Median Loss |
| Tip | 43% | $138,000 |
| Internal Audit | 15% | $138,000 |
| Management Review | 13% | $93,000 |
| Documentation Examination | 5% | $133,000 |
| Account Reconciliation | 5% | $163,000 |
| By Accident | 4% | $135,000 |
| Automated Transaction/
Data Monitoring |
3% | $138,000 |
| External Audit | 2% | $334,000 |
| Surveillance/Monitoring | 2% | $66,000 |
| Notified by Law Enforcement | 2% | $500,000 |
| Confession | 1% | $125,000 |
An important point is that controls such as management reviews and internal audits account for a significant percentage of detection methods (28 percent), while the external audit accounts for only 2 percent. The point is that companies should not rely on the external audit to detect fraud but should put in place internal mechanisms to prevent and detect it.
The results indicate that tip, internal audit, and management review accounted for 71 percent of fraud detection. That’s not bad but organizations should be able to do better by strengthening their audit committees’ responsibilities, ensuring an independent board of directors and strengthening internal controls.
The survey points out that while the presence of internal controls does not guarantee protection against fraud, it can help to both mitigate losses and deter some potential fraudsters by enhancing the perception of detection. Consequently, enacting internal controls specifically designed to prevent and detect fraud is a necessary part of a fraud risk management program.
With 43 percent of fraud being detected by tips, hotlines should play an essential role in organizations’ anti-fraud programs. 85% of organizations with 100 or more employees reported having a hotline mechanism in place, compared to only 24% of organizations with fewer than 100 employees.
However, only 73 percent of victim organizations had a hotline or formal reporting mechanism in place. This is important because 52 percent of occupational frauds were reported by employees. More organizations need a dedicated outlet to report fraud. It is worth noting that the remaining 48% were reported by customers, vendors, and anonymous tipsters.
It may seem counterintuitive that while the external audit only detects fraud 2 percent of the time, it is the second most common anti-fraud control with 83 percent of respondents indicating its usage as such. We might conclude that the financial statement audit is conducted not so much to detect fraud but because the SEC requires public companies to have such an audit. The frequency of anti-fraud controls is as follows.
Frequency of Anti-Fraud Controls: 2026 ACFE Occupational Fraud Survey
| Anti-Fraud Control | Percentage Reported |
| Code of Conduct | 88% |
| External Audit of Financial Statements | 83% |
| Internal Audit Department | 80% |
| Management Certification of Financial Statements | 76% |
| Hotline | 73% |
| External Audit of Internal Controls over Financial Reporting | 72% |
| Management Review | 71% |
| Independent Audit Committee | 69% |
| Fraud Training for Employees | 67% |
| Fraud Training for Managers/Executives | 67% |
| Anti-Fraud Policy | 65% |
| Employee Support Programs | 63% |
| Dedicated Fraud Department, Function, or Team | 54% |
| Formal Fraud Risk Assessments | 51% |
| Proactive Data Monitoring/Analysis | 49% |
| Surprise Audits | 44% |
| Job Rotation/Mandatory Vacations | 27% |
| Rewards for Whistleblowers | 14% |
Individuals who are engaged in occupational fraud schemes often exhibit certain behavioral traits or warning signs associated with their illegal activities. Of particular note is living beyond one’s means (39 percent) and financial difficulties (29 percent). The question is how can the anti-fraud controls identify these behavioral indicators of fraud? These behavioral red flags might show up through personal and workplace relationships. There may be warning signs such as internal and external relationships that create pressures to carry out one’s obligations ethically. Here are the results.
Behavioral Red Flags Displayed by Perpetrators: ACFE 2026 Occupational Fraud Survey
| Behavioral Indicators of Fraud | Percentage Reported |
| Living Beyond Means | 39% |
| Financial Difficulties | 29% |
| Unusually Close Association with Vendor/Customer | 17% |
| No Behavioral Red Flags | 16% |
| Control Issues, Unwillingness to Share Duties | 12% |
| Irritability, Suspiciousness, or Defensiveness | 11% |
| Bullying or Intimidation | 11% |
| Divorce/Family Problems | 9% |
| “Wheeler-Dealer” Attitude | 9% |
| Addiction Problems | 8% |
| Complained About Inadequate Pay | 6% |
| Other | 5% |
| Other Employment-Related Problems | 5% |
| Excessive Pressure from Within the Organization | 5% |
| Refusal to Take Vacations | 5% |
| Past Employment-Related Problems | 5% |
| Past Legal Problems | 5% |
| Excessive Tardiness/Absenteeism | 4% |
| Social Isolation | 4% |
| Complained about Lack of Authority | 4% |
| Excessive Family/Peer Pressure for Success | 3% |
| Instability in Life Circumstances | 3% |
| Excessive Internet Browsing | 2% |
In my opinion, fraud will always exist in organizations. All too many people/organizations act do the wrong thing and it could be because of pressures to meet some goal (i.e., earnings) and/or weak internal systems. Moreso, it’s because of a lack of ethical leadership from the top, the failure to establish an ethical culture, and a value-based system that stresses self-interest above all else. This brings me to the next point. It’s a shame that Section 404 of SOX, which mandates auditor assessment of internal controls over financial reporting (ICFR) has recently been watered down for small companies. They recently received a major exemption from the independent auditor’s attestation requirements. I can’t understand why these controls would be weakened at a time when fraud is on the rise in all organizations. I’ll go so far to say we have a cheating culture in the U.S. today whether it’s in business, our personal lives, in sporting events, and all of politics. Call me a cynic.
I am reminded what Lily Tomlin famously said: “No matter how cynical you become, it’s never enough to keep up.”
Blog posted by Steven Mintz, PhD, professor emeritus from Cal Poly San Luis Obispo, on October 21, 2026. You can contact Dr. Mintz at: smintz@calpoly.edu. Visit his website to learn more about his activities.