Document Type

Article

Publication Date

12-2018

Abstract

[Excerpt] Financial fraud is a significant cost in the hospitality industry. According to the Report to the Nations on Occupational Fraud and Abuse, the typical organization loses 5 percent of its annual revenues to fraud. Hotels in particular are estimated to lose 5 to 6 percent of revenues to fraud on average, while the National Restaurant Association estimates that restaurants on average lose 4 percent of revenues to fraud. These are losses as a percentage of top-line revenues, not profits, meaning that their magnitudes represent a significant risk to hospitality methodology for detecting financial irregularities that may signal fraud based on a mathematical principle known as Benford’s Law. The analysis presented here can firms, given the industry’s relatively thin net margins. This study presents a simple be applied by hospitality industry managers at all levels, from individual units or departments to entire regions or companies. The Cornell Hospitality Tool accompanying this report provides an easy-to-use spreadsheet-based application that can be used to quickly analyze any set of financial values (for example, guest checks, receivables, payables, or reimbursements) to quickly detect suspicious activities.

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BenfordTool_submission_revisedNov2018.xlsm (628 kB)
Benford Digit Analysis Tool

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