Occupational Fraud Tree
Definition
The ACFE's hierarchical classification of occupational fraud schemes, with three top-level branches (asset misappropriation, corruption, financial-statement fraud) subdividing into dozens of named scheme types.
- Source
- ACFE (Association of Certified Fraud Examiners)
- Top-level branches
- Asset misappropriation, corruption, financial-statement fraud
- Structure
- Hierarchical, subdividing into named scheme types
- Use
- Classification framework for occupational fraud investigations
Common questions
Which branch of the Occupational Fraud Tree is most commonly reported in ACFE surveys?+
Asset misappropriation schemes, such as skimming, cash larceny and fraudulent disbursements, are consistently the most frequently reported category in ACFE's periodic Report to the Nations surveys, though they tend to cause smaller median losses than corruption or financial-statement fraud.
How does the Occupational Fraud Tree help an investigator scope a fraud examination?+
By working through the tree's subcategories systematically, an investigator can rule branches in or out based on the available evidence and the suspect's role, narrowing the investigation toward specific scheme types (such as billing schemes versus payroll schemes) rather than searching broadly without structure.
Can a single fraud case involve schemes from more than one branch of the tree?+
Yes, complex or long-running frauds often combine methods, for example an employee committing asset misappropriation to fund personal expenses while also falsifying financial statements to conceal the resulting shortfall, so investigators frequently classify a case under multiple scheme types.
Related terms
- Asset Misappropriation
- The largest Fraud Tree branch, covering schemes in which an employee steals or misuses the organisation's assets. Subcategories include cash schemes (skimming,...
- Corruption
- Schemes in which an employee misuses their position to gain a direct or indirect benefit, typically involving a third party. The four...
- Financial-Statement Fraud
- Intentional misstatement or omission in financial reports to deceive users of those reports, typically to inflate earnings, understate liabilities, or maintain a...
- Median Loss
- The loss figure at the midpoint of the distribution of cases, used in the ACFE's data because it is more representative of...
- Skimming
- An off-book cash theft: revenue is stolen before it enters the accounting system, so no entry is ever made. Skimming is harder...