Where Are They Now? An Ex Post Analysis of Misappropriation Fraud

ABSTRACT There are many studies that investigate asset misappropriation fraud. However, there are still unknowns around its impact on the perpetrator, the victim organization, and the organizational changes post-fraud, especially when data include relatively smaller losses (sample median of 27, 000). We conducted a survey of employees with knowledge of misappropriation fraud at their workplace to better understand this issue. We measured indirect costs of fraud and investigated the opportunities that led to it. Further, we investigated how companies handled the investigation and remediation of employee oversight. Overall, even when direct costs of fraud are low, indirect costs to the perpetrator and to the victim organization can be significant. Surprisingly, only 74 percent of our respondents reported oversight remediation post-fraud. Companies should prioritize oversight remediation to prevent similar frauds from recurring. Our findings indicate that organizational use of root cause analysis after fraud leads to implementation of better oversight measures. Data Availability: Data are available upon request. JEL Classifications: M49.