Asset misappropriation schemes were the “middle children” of the study; they were more common than fraudulent statements and more costly than corruption.

The statement is false because it incorrectly describes the relative cost of asset misappropriation schemes. While it is true that asset misappropriation is the most common form of occupational fraud (and therefore more common than fraudulent statements), it is the least costly. According to the Association of Certified Fraud Examiners (ACFE), corruption schemes have a higher median loss than asset misappropriation schemes. Financial statement fraud, while the least common, is by far the most costly.

The "True" option is incorrect because it accepts a factually inaccurate comparison of fraud costs. The statement combines a true premise (asset misappropriation is more common than fraudulent statements) with a false one (it is more costly than corruption). For the entire statement to be true, both clauses must be correct. Based on foundational ACFE research, asset misappropriation has the lowest median loss of the three primary categories of occupational fraud.

1. Association of Certified Fraud Examiners. (2022). Occupational Fraud 2022: A Report to the Nations. In the "How Occupational Fraud Is Committed" section

Figure 4

"Frequency and Median Loss by Fraud Type Category

" clearly shows that asset misappropriation schemes have a median loss of $100

000

while corruption schemes have a median loss of $117

000. This directly contradicts the claim that asset misappropriation is more costly than corruption. (p. 11).

2. Association of Certified Fraud Examiners. (2023). Fraud Examiners Manual (International Edition). In Section 1

"Introduction

" the manual discusses the findings from the Report to the Nations. It states

"Asset misappropriation schemes are the most common type of occupational fraud... However

these schemes also tend to cause the lowest median losses... In contrast

financial statement fraud schemes are the least common but most costly form of occupational fraud." This summary confirms the cost hierarchy where asset misappropriation is the least costly. (pp. 1.105–1.106).