ASSET MISAPPROPRIATION

INTRODUCTION:

In laws, fraud is deliberate deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.
Needless to say how costly fraud could be to any person/organisation. It is far beyond just financial losses.

There are many classifications for fraud like either external fraud or internal fraud. External fraud is committed by
individuals outside the organisation. However, internal fraud is committed by employees of the company and is
commonly known as either ‘occupational fraud. Occupational fraud was defined by ACFE, (2002) as: “The use of
one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing
organisation’s resources or assets”.

Hence, Asset misappropriation schemes include those frauds in which a fraudster employs trickery or deceit to
steal or misuse an organization’s resources. Asset misappropriation schemes most often involve theft of cash,
although this is not always the case.

In a recent study by the ACFE, approximately 85% of all asset misappropriation cases involved the misuse of
cash (ACFE, 2008). This type of fraud can be committed by company directors, or its employees, or
anyone else entrusted to hold and manage the assets and interests of an organisation.

DEFINATION & MEANING:

Asset misappropriation is often accompanied by false or misleading records or documents in order to

conceal the fact that the assets are missing or have been pledged without proper authorization. Asset
misappropriation fraud involves third parties or employees in an organisation who abuse their position to steal from
it through fraudulent activity. It can also be known as insider fraud as well as Occupational Fraud (as discussed
above).

As referred to Standard on Auditing 240 (The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial
Statements):
Misappropriation of assets involves the theft of an entity’s assets and is often perpetrated by employees in
relatively small and immaterial amounts. However, it can also involve management who are usually more
able to disguise or conceal misappropriations in ways that are difficult to detect. It can be accomplished in
a variety of ways including:
a. Embezzling receipts ,
b. Stealing physical assets or intellectual,
c. Causing an entity to pay for goods and services not received,
d. Using an entity’s assets for personal use.

Typically, the assets stolen are cash or cash equivalents, such as credit notes or vouchers. However, the
fraud can extend to include company data or intellectual property. At one end of the scale, asset
misappropriation fraud may be limited to isolated cases of expense fiddling or an employee lying about
his or her qualifications to get a job. At the other end, it might involve organised crime groups infiltrating
organisations to take advantage of weak processes and inadequate internal systems and controls. Apart
from the direct impact of lost funds, asset misappropriation fraud can also impact on an organisation’s
staff morale and reputation.

The definition of asset misappropriation fraud doesn’t include straight theft from an organisation by
insiders, such as stealing stationery or other physical assets.

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FRUAD TREE:

“Fraud” refers to an intentional act by one or more individuals among management, those charged with
governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage. (As
referred in Indian Standard on Auditing 240).

Common classifications of fraud: Corruption, Asset Misappropriation and Fraudulent Financial Statements.
These are three main categories of internal fraud that affect any organizations. The same can be easily understood
via below given “FRAUD TREE”, as mentioned in Report to Nation.

A. Corruption :-
 Conflicts of Interest
a. Purchasing Schemes
b. Sales Schemes
 Bribery
a. Invoice kickbacks
b. Bid Ragging.
 Illegal Gratuities
 Economic Extortion

B. Asset Misappropriation :-

 Cash
a. Theft of Cash in hand

b. Theft of Cash Receipts

1. Skimming:

Sales Receivables Refund & Other

Unrecorded Write off Schemes
Understated Lapping Schemes
Unconcealed

2. Cash Larceny

c. Fraudulent Disbursements

Billing Payroll Expenses Check Register

Schemes Schemes Reimbursement Tempering Disbursement
Scheme
Shell Ghost Mischaracterized Forged Maker False Voids
Company Employee Expenses
Non- Falsified Overstated Forged False Refunds
Accomplice Wages Expenses Endorsement
Vendor
Personal Commission Fictitious Altered Payee
Purchases Schemes Expenses
Multiple Authorised
Reimbursements Checker

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 Inventory and all other Assets
a. Misuse
b. Larceny
1. Assets Requisition & transfer
2. False Sales & shipping
3. Purchasing & receiving
4. Unconcealed Larceny

C. Financial Statement Fraud :-

 Assets/ Revenue Overstatements
a. Timing Difference
b. Fictitious revenue
c. Concealed Liabilities & Expenses
d. Improper Assets Valuation
e. Improper Discloser

 Assets/ Revenue Understatements

a. Timing Difference
b. Understated revenue
c. Overstated Liabilities & Expenses
d. Improper Discloser

TYPES OF FRAUDS OR SCHEMES FOR ASSET MISAPPROPRIATION:

As discussed above in Fraud Tree, there are various kind of Fraudulent Acts happens which are classified under
Asset Misappropriation. These are as given below in detail:

1. CASH:

1.1 Theft of Cash in hand :

Cash is the focal point of most accounting entries. Cash, both on deposit in banks and on hand as petty
cash, can be misappropriated through many different schemes. These schemes can be either on-book or off-
book, depending on where they occur.

1.2 Theft of Cash Receipts

Cash receipts schemes fall into two categories: Skimming & Cash Larceny. The difference in the two
types of fraud depends on its occurrence. Cash larceny is the theft of money that has already appeared on a
victim organisation’s books, while skimming is the theft of cash that has not yet been recorded in the
accounting system.

1.2.1 Skimming: Skimming is the removal of cash from a victim entity prior to its entry in an accounting
system. Employees who skim from their companies steal sales or receivables before they are recorded in
the company books. Skimming schemes are known as “off-book” frauds. The stolen funds are never
recorded, the victim organisation may not be aware that the cash was ever received. Consequently, it may
be very difficult to detect that the money has been stolen.

It is further classified as given below:

Continued to next page…

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a. Sales Skimming: The most basic skimming scheme occurs when an employee sells goods or services to a
customer, collects the customer’s payment, but makes no record of the sale. Sales skimming happens by :

Register Manipulation: The false transaction is entered on the register so that it appears a sale is being
rung up. The perpetrator opens the register drawer and pretends to place the cash he has just received in the
drawer, but in reality he pockets the cash. To the casual observer it looks as though the sale is being
properly recorded.

Skimming During Non-business Hours: Another way to skim unrecorded sales is to conduct sales during
non-business hours. For instance, some employees will open stores on weekends or after hours without the
knowledge of the owners. They can pocket the proceeds of all sales made during these times because the
owners have no idea that their stores are even open for business.

Skimming of Off-Site Sales: Several industries rely on remote salespersons to generate revenue. The fact
that these employees are largely unsupervised puts them in a good position to skim revenues.

Poor Collection Procedures: Poor collection and recording procedures can make it easy for an employee
to skim sales or receivables.

The Understated Sales: Understated sales work by lowering amount than what the perpetrator actually
collected. Mostly employees commit understated sales schemes is by altering receipts or preparing false
receipts that misstate the amount of sales.

False Discount: Those employees with the authority to grant discounts may utilise this authority to skim
sales and receivables. Here they accept full payment for an item, but records the transaction as if the
customer had been given a discount.

Theft of Cheques Received Through the Mail: Theft of incoming cheques usually occurs when a single
employee is in charge of opening the mail and recording the receipt of payments. This employee simply
steals one or more incoming cheques instead of posting them to customer accounts.

Cheque for Currency Substitutions: Currency is harder to trace than a cheque. A cashed cheque
eventually returns to the person who wrote it and may provide evidence of who cashed it or where it was
spent. Currency, on the other hand, disappears into the economy once it is stolen. Hence, fraudsters swap
cheque for currency.

b. Skimming Receivables: It is more difficult to conceal the skimming of receivables than the skimming of
sales because receivables payments are expected. When receivables are skimmed, the absence of the
payment appears on the books as a delinquent account. In order to conceal a skimmed receivable, a
perpetrator must somehow account for the payment that was due to the company but never received.
Skimming receivables happens by :

Forcing Account Balances or Destroying Transaction Records: When perpetrator is in charge of

collecting and posting payments than he or she can falsify records to conceal the theft of receivables
payments.

Lapping: Lapping is the crediting of one account through the abstraction of money from another account.
It is the fraudster’s version of “robbing Peter to pay Paul.”

Stolen Statements: When employees skim receivables, they may let the targeted accounts age instead of
attempting to force the balances and they simply act as if the cheque never arrived. This method keeps the
victim organisation’s cash account in balance, because the stolen payment is never posted.

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False Account Entries: Intercepting the customer’s statements will keep him in the dark as to the status of
his account, but as long as the customer’s payments are being skimmed, his account is slipping further and
further past due. The perpetrator must bring the account back up-to-date in order to conceal his crime.
Another way is to make false entries in the victim organisation’s accounting system.

Debits to Expense Accounts: An employee might conceal the skimming of funds by making unsupported
entries i.e. instead of debiting Cash on receiving of funds the fraudster might choose to debit an expense
account. This transaction still keeps the company’s books in balance, but the incoming cash is never
recorded. In addition, the customer’s receivable account is credited, so it will not become delinquent.

Debits to Aging or Fictitious Receivables: An employee who has skimmed one customer’s payments
might add the stolen amounts to aging accounts which are soon to be written off as uncollectible or to very
large accounts where a small debit might go unnoticed.

1.2.1 Cash Larceny: It may be defined as the intentional taking of an employer’s cash without the
consent and against the will of the employer. A cash larceny scheme can take place in any circumstance in
which an employee has access to cash. Cash larceny can be happens by:

a. Incoming Cash: Hereunder this case fraudster steals cash during incoming. Like :

Theft of Cash from the Register: The register (or similar cash collection points like cash drawers or cash
boxes) is usually the most common point of access to cash for employees, so it is understandable that this is
where larceny schemes frequently occur.

Reversing Transaction: Some employees conceal cash larceny by processing reversing transactions,
which cause the register tape to reconcile to the amount of cash on hand after the theft.

Register Manipulation: Instead of using reversing entries, an employee might manually alter the register
tape. An employee might use white-out to cover up a sale whose proceeds were stolen, or he might simply
cross out or alter the numbers on the tape so that the register total and the cash drawer balance.

Altering Cash Accounts: When cash from a register is totalled and prepared for deposit, an employee
simply records the wrong amount so that the cash on hand appears to balance with the total on the register
tape. Obviously, employees who deal with the receipt of cash should not be charged with verifying the
amount of cash on hand in their own register, but this control is often overlooked.

Destroying Register Tapes: Employees who are stealing from the register sometimes destroy detail tapes
that would implicate them in a crime. When detail tapes are missing or defaced, it may be because someone
is trying to conceal a fraud.

b. Cash Larceny from the Deposit: At some point in every revenue-generating business, someone must
physically take the company’s currency and cheques to the bank. This person or persons, left alone
literally holding the bag, will have an opportunity to take a portion of the money prior to depositing it
into the company’s accounts.

c. Deposit Lapping: Lapping occurs when an employee steals the deposit from day one, and then
replaces it with day two’s deposit. Day two is replaced with day three, and so on. The perpetrator is
always one day behind, but as long as no one demands an up-to-the minute reconciliation of the
deposits to the bank, he may be able to avoid detection for a period of time.

d. Deposits in Transit: A final strategy used to conceal stolen deposits is to carry the missing money as
deposits in transit, which are a way of accounting for discrepancies between the company’s records
and the bank statement.
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1.3 Fraudulent Disbursements :

In fraudulent disbursement schemes, an employee makes a distribution of company funds for a dishonest
purpose. It is not appear any different from valid disbursements of cash. The perpetrator has taken money
from his employer in such a way that it appears to be a normal disbursement of cash. Someone might
notice the fraud based on the amount, recipient, or destination of the payment, but the method of payment
is legitimate.

There are various schemes under Fraudulent Disbursement for fraud. Some are discussed here below:

1.3.1 Register Disbursement Schemes: Fraudulent disbursements at the cash register are different from
the other schemes that often take place at the register, such as skimming and cash larceny. When cash is
stolen as part of a register disbursement scheme, the removal of the cash is recorded on the register tape. A
false transaction is entered so it appears that the disbursement of money was legitimate.

There are two basic register disbursements schemes: false refunds and false voids.

a. False Refunds: A refund is processed at the register when a customer returns an item of
merchandise that was purchased from the store. The transaction that is entered on the register
indicates the merchandise is being replaced in the store’s inventory and the purchase price is
being returned to the customer.

b. Fictitious Refunds: In a fictitious refund scheme, an employee processes a transaction as if a

customer were returning merchandise, even though there is no actual return.

c. False Voids: Here, they make fraudulent disbursements from the register appear to be
legitimate. When a sale is voided on a register, a copy of the customer’s receipt is usually
attached to a void slip, along with the signature or initials of a manager indicating that the
transaction has been approved

1.3.2 Cheque Tampering Schemes: Cheque tampering is unique among the fraudulent disbursement
schemes; hereunder the perpetrator physically prepares the fraudulent cheque. Mostly under this case, the
culprit generates a payment to himself by submitting some false document to the victim organisation such
as an invoice or a timecard. The false document represents a claim for payment and causes the victim
organisation to issue a cheque that the perpetrator can convert.

1.3.3. Forged Maker Schemes: A forged maker scheme may be defined as a cheque tampering scheme
in which an employee misappropriates a cheque and fraudulently affixes the signature of an authorised
maker thereon.

1.3.4 Forged Endorsement Schemes: Forged endorsements are those cheque tampering schemes in
which an employee intercepts a company cheque intended to pay a third party and converts the cheque by
endorsing it in the third party’s name. In some cases the employee also signs his own name as a second
endorser.

1.3.5 Altered Payee Schemes: Altered payee scheme is a form of cheque tampering in which an
employee intercepts a company cheque intended for a third party and alters the payee designation so that
the cheque can be converted by the employee or an accomplice. The employee inserts his own name, the
name of an accomplice, or the name of a fictitious entity on the payee line of the cheque.

1.3.6 Concealing Cheque Tampering Schemes: Most cheque tampering schemes do not consist of a
single occurrence but instead continue over a period of time. Sometimes, occupational fraudsters remain
employees of their companies as they continue to steal from them, which make concealment the key to the
crime.

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1.3.7 Authorised Maker Schemes: An authorised maker scheme occurs when an employee with
signature authority on a company account writes fraudulent cheques for his own benefit and signs his own
name as the maker.

1.3.8 Billing Schemes: Under this scheme, the perpetrator to misappropriate company funds without
ever actually handling cash or cheques while at work. These succeed by making a false claim for payment
upon the victim organisation.

a. Shell Company: Shell companies are fictitious entities created for the purpose of committing
fraud. They may be nothing more than a fabricated name and a post office box that an employee
uses to collect disbursements from false billings. However, since the cheques received will be
made out in the name of the shell company, the perpetrator will normally also set up a bank
account in his new company’s name, so he can deposit and cash the fraudulent cheques.

b. Pay-and-Return Schemes: In pay-and-return schemes, employees intentionally mishandle

payments which are owed to legitimate vendors One way to do this is too purposely double-pay an
invoice. For instance, a clerk might intentionally pay an invoice twice, then call the vendor and
request that one of the cheques be returned. The clerk then intercepts the returned cheque.

c. Personal Purchases on Credit Cards of Company or Other Company Accounts: Some

employees make personal purchases on company credit cards or on running accounts with vendors.
An employee with a company credit card can buy an item merely by signing his name (or forging
someone else’s) at the time of purchase. Later review of the credit card statement, however, may
detect the fraudulent purchase. Unfortunately, many high-level employees approve their own credit
card expenses, making it very easy to carry out a purchasing scheme.

1.3.9 Payroll Fraud Schemes: Payroll schemes are similar to billing schemes. In payroll schemes, the
perpetrator typically falsifies a timecard or alters information in the payroll records. The major difference
between payroll schemes and billing schemes is that payroll frauds involve disbursements to employees
rather than to external parties. The most common payroll frauds are ghost employee schemes, falsified
hours and salary schemes, and commission schemes.

a. Ghost Employees: The term ghost employee refers to someone on the payroll who does not
actually work for the victim company. Through the falsification of personnel or payroll records a
fraudster causes pay cheques to be generated to a ghost. The ghost employee may be a fictitious
person or a real individual (known to fraudster) who simply does not work for the victim employer
and then fraudster converts these pay cheque.

In order for a ghost employee scheme to work, four things must happen:
(1) The ghost must be added to the payroll,
(2) Timekeeping and wage rate information must be collected,
(3) A paycheque must be issued to the ghost, and
(4) The cheque must be delivered to the perpetrator or an accomplice.

b. Falsified Hours and Salary Scheme: The most common method of misappropriating funds from
the payroll is the overpayment of wages. For hourly employees, the size of a paycheque is based on
two factors: the number of hours worked and the rate of pay. Under this scheme, employee must
either falsify the number of hours he has worked or change his wage rate. However, salaried
employees generate fraudulent wages by increasing their rates of pay.

c. Commission Schemes: Commission is a form of compensation calculated as a percentage of the

amount of transactions a salesperson or other employee generates. A commissioned employee’s
wages are based on two factors, the amount of sales he generates and the percentage of
commission. Hence, an employee can generate commission fraudulently by :
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(1) Falsify the amount of sales made, or
(2) Increase his rate of commission

1.3.10 Expense Reimbursement Schemes: Employees can manipulate an organisation’s expense

reimbursement procedures to generate fraudulent disbursements. Under this scheme: an employee
submits a report detailing an expense incurred for a business purpose, such as a business lunch
with a client, airfare, hotel bills associated with business travel, and so forth. In preparing an
expense report, an employee is usually required to explain the business purpose for the expense,
time, date, and location in which it was incurred, in such reports, he manipulates or provides false
data. There are some common types of expense reimbursement schemes. They are as follow :

a. Mischaracterised Expense Reimbursements: Most companies only reimburse certain expenses

of their employees. Which expenses a company will pay for depends to an extent upon policy, but
in general, business-related travel, lodging, and meals are reimbursed. One of the most basic
expense reimbursement schemes is perpetrated by simply requesting reimbursement for a personal
expense by claiming that the expense is business related.

b. Overstated Expense Reimbursements: Instead of seeking reimbursement for personal expenses,

some employees overstate the cost of actual business expenses

c. Fictitious Expense Reimbursements: Employees sometimes seek reimbursement for wholly

fictitious expenses. Instead of overstating a real business expense or seeking reimbursement for a
personal expense, an employee just invents an expense and requests that it be reimbursed.

d. Multiple reimbursements: This scheme iinvolves submission of a single expense several times
e.g. submission of several types support for the same expense.

2. INVENTORY AND OTHER ASSETS:

Employees target inventory, equipment, supplies, and other non-cash assets for theft in a number of ways.
These schemes can range from stealing a box of pens to the theft of millions of dollars’ worth of company
equipment. The term inventory and other assets are meant to encompass the misappropriation schemes
involving any assets held by a company other than cash.

There are basically two ways a person can misappropriate a company asset. The asset can be misused or it
can be stolen.

2.1 Misuse of Company Assets: Employee might use his/her laptop/computer at work to write letters,
print invoices/ documents, or does other work connect to his/her side. He can misuse stationaries,
computer systems, internet services, telecommunication system, vehicle and even sometime
subordinates services. An organisation is full of resources and assets. An employee can take any wrong
or personal advantage by misusing Company’s Inventory or other assets.

2.2 Theft of inventory and other assets: This may include larceny, asset requisition, receiving schemes,
false shipment schemes.

 Larceny: It involves employee simply takes inventory or other assets from the company premises
without attempting to conceal the theft in the records and books. It can also happen through false sale
by an accomplice of the employees where a sale is not actually realised.

 Asset requisitions and transfers: Employee requisitions materials for some work related project
thane makes off with those materials. Employee may also overstate the amount of supplies or
equipment needed and pilfers the excess or he/she may invent a fictitious project which necessitates the
use of certain assets he/she intends to steal. He can also falsify asset transfer forms.

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 Purchasing and receiving scheme: Employee charged with receiving goods may falsify records
incoming shipments or marks some goods as substandard and keeps them instead of sending to the
vendor.

 False shipment of inventory and other assets: Employees may create false shipping documents and
false sales documents to make it appear that the inventory they take was sold rather than stolen. This
creates fake accounts receivable in the books hence delinquency.

DETECTION OF ASSET MISAPPROPRIATION FRAUD:

It will never be possible to eliminate all fraud. No system is completely ‘fraud proof’ because many fraudsters
can bypass the control systems put in place to stop them. However, if an organization pays greater attention to
the most common indicators, this can provide early warning that something is wrong and increase the
likelihood of discovering the fraudster. Fraud indicators fall into two categories: Warning Signs & Fraud
Alerts.

 Warning signs :
a. Business risk.
b. Financial risk.
c. Environmental risk.
d. IT and data risk

 Fraud alerts or Red Flags:

Fraud alerts have been described as specific events, or red flags, which may indicate fraud. The red flags for
asset misappropriation fall into six categories:
1. Accounting anomalies: such as faulty journal entries, inaccuracies in ledgers, or fictitious
documents,
2. Internal control overrides and breakdowns,
3. Analytical fraud symptoms, which include procedures or relationships that are unusual or too
unrealistic to be plausible.
4. Lifestyle symptoms like people who commit fraud usually meet their immediate need and then
gradually start to increase their lifestyles,
5. Unusual behaviours of people in organisation and
6. Tips and complaints that something is suspicious.

Tools and Techniques

There are followings tools and techniques for identifying or detecting possible fraudulent activities in any
organization:
a. Ongoing risk assessment
b. Trend analysis:
c. Data matching.
d. Exception reporting.
e. Internal audit.
f. Reporting mechanisms.

PREVENTION FROM ASSET MISAPPROPRIATION FRAUDS:

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Since everyone loses once an asset misappropriate fraud has occurred, organizations can realize huge savings
through fraud prevention. Most organizations have some preventive controls in place, but realize that, even the
best controls, cannot prevent all frauds. Therefore, organizations should engage in pro-active fraud prevention,
regardless of how honest they believe their employees are.
Following are the few ways for Fraud prevention in any organisation:
o Creating a culture of honesty, openness and assistance for all employees.
o Eliminating opportunities for fraud to occur.
o Creating a positive work environment.
o Implementing effective employee assistance programs (EAPs).
o Maintaining a good system of internal controls.
o Implementing ways to discourage collusion between employees and others.
o Monitoring employees and instituting an effective whistle-blower system
o Conducting pro-active fraud auditing.
o Vet employees thoroughly checking employee CVs and references.
o Control access to buildings and systems using unique identification and passwords.
o Impose clear segregation of duties.
o Use tiered authority and signature levels for payments
o Regularly reconcile bank statements and other accounts.
o Promote a culture of fraud awareness among staff.
o Adopt, and rigorously implement, a zero tolerance policy towards employee fraud.
o Have a clear response plan in place in case fraud is discovered.
o Require that employees with similar duties regularly alternate specific tasks.
o Separate the custodial, record keeping and supervisory functions of the cash collection
process.
o Increase Supervision and Monitoring
o Place CC Cameras in a visible location.
o Comparing employee addresses and phone numbers to vendor master files.
o Confirming receivables on a regular and surprise basis.
o Reviewing exception reports and investigates deviation/exception files such as changes to
Master File.
o Requiring supervisory approval for write-offs.

Overview as per Indian Standard on Auditing 240:

As define above, Misappropriation of assets involves the theft of an entity’s assets and is often perpetrated by
employees in relatively small and immaterial amounts.

Misappropriation of assets can be accomplished in a variety of ways including:

A. Embezzling receipts like misappropriating collections on accounts receivable or diverting receipts in
respect of written-off accounts to personal bank accounts.

B. Stealing physical assets or intellectual property like stealing inventory for personal use or for sale,
stealing scrap for resale, colluding with a competitor by disclosing technological data in return for
payment.

C. Causing an entity to pay for goods and services not received like payments to fictitious vendors,
kickbacks paid by vendors to the entity’s purchasing agents in return for inflating prices, payments to
fictitious employees.
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D. Using an entity’s assets for personal use like using the entity’s assets as collateral for a personal loan
or a loan to a related party.

Reporting by an Auditor: The auditor may, at times, be required to by legislation or a regulation to make a specific
assertion in respect of frauds on/by the entity in his report. For example, Clause (x) of the Companies (Auditor’s
Report) Order, 2016 requires the auditor to specifically report “Whether any fraud by the company or any fraud on
the Company by its officers or employees has been noticed or reported during the year; If yes, the nature and the
amount involved is to be indicated”.
Similarly, in case of audit of banks, the auditors is required to report to the Reserve Bank of India anything
susceptible to fraud or fraudulent activity or act of excess power or any foul play in any transaction.

CONCLUSION:

In conclusion, Asset misappropriation is a very expensive problem for organizations. Unfortunately, few
organizations proactively address this problem, which creates a reoccurring cycle of theft within many
organizations. By creating a proactive asset misappropriation policy, organizations can effectively assign
responsibility and greatly reduce their susceptibility to these schemes.

Asset misappropriation schemes includes the prevalence of asset misappropriation, its effect on organizations
throughout the world, the effectiveness and pervasiveness of proactive asset misappropriation detection
techniques, and the impact of contextual, environmental, and cultural factors on this problem have to studied
in detail.

Further, it is also concluded after study of Fraud Tree, there are numerous Assets Misappropriation Schemes
which are followed by fraudster and Asset misappropriation is the most famous and recurring fraud in any
industry. Asset misappropriation schemes generally start small and get larger as perpetrators gain confidence in
their ability to get away with their dishonest schemes. Despite the serious risk that fraud presents to business, many
organizations still do not have formal systems and procedures in place to prevent, detect and respond to fraud. No
system is completely fool proof, but business can take steps to deter fraud and make it much less attractive to
commit. While events, such as an internal or external audit, may threaten the perpetrator’s attempts at concealment
and cause the scheme to be discontinued for a period of time, once the threat has passed, the perpetrator(s) will
typically resume the scheme and continue to steal until the fraud is detected.

Hence, there is Report of nation 2016 is given below for a clear study of Asset Misappropriation frauds
prevailing and its impact, under conclusion.

Report to Nation 2016 by ACFE:

Due to high percentage of cases in ACFE study involved asset misappropriation, they expanded their analyses
of these cases by examining the frequency and median loss of the principal asset misappropriation sub-
schemes. The chart below reflects the relative risks posed by each of these sub-schemes. Hover over the
circles to see median loss and frequency data for each scheme type:

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