NCJ Number
95590
Date Published
1984
Length
32 pages
Annotation
Auditors' concern with electronic data processing (EDP) related fraud is discussed; the results of two industry surveys that focused on specific EDP-related fraud cases are reported.
Abstract
EDP-related fraud is defined as 'any intentional act, or series of acts, that is designed to deceive or mislead others and that has an impact on an organization's financial statements. EDP must be involved in the perpetration or coverup of the act or series of acts.' To study EDP-related fraud, surveys were conducted in the banking and insurance industries. These industries were selected because both are highly automated and both deal in liquid assets. Similar questionnaires were sent to 9,405 banks and 1,232 insurance companies. A total of 85 cases of EDP-related fraud were identified in the bank survey, which yielded a 55-percent response rate. A total of 34 cases of EDP-related fraud were identified in the insurance survey, which yielded a 69-percent response rate. Thus, a total of 119 cases of EDP-related fraud were found in the 2 surveys. In almost all cases, the fraud occurred during normal transaction processing cycles, in both batch and online systems. Most frauds were perpetrated in the input area and in some cases, there appears to have been no attempt at concealment. In other cases, perpetrators attempted to conceal their frauds by altering names and addresses to divert normal customer correspondence. Several cases involved over 100 transactions, but in one case, several million dollars were taken in a single transaction. Most perpetrators in the banking industry were either data entry clerks or loan officers; in the insurance industry, perpetrators were either claim processors or policy service clerks. In most cases, people uncovering the frauds were within the company; in about one-fourth of the cases, customer complaints led to fraud detection. An appendix containing summaries of 39 cases is provided, as are 9 tables.