Downturn has led to company fraud rising ‘at an alarming rate’: Business Day
Downturn has led to company fraud rising ‘at an alarming rate’: Business Day
Business Day, 17 Sep 2010. By Sanchia Temkin. The global downturn had heightened the pressures for employees and executives to commit fraud, said Graham Dawes, a director for risk advisory at Deloitte yesterday. In hard times, the temptation to inflate results or take part in other forms of financial fraud might override values and ethics, he said.
As much as 5% of a company’s annual turnover was lost to fraud, according to this year’s annual report of the Association for Certified Fraud Examiners in the US.
It said that the median loss in 1 843 fraud cases examined worldwide between January 2008 and December last year was $160 000, while a quarter of the cases involved losses of at least $1m.
James Roberts, a director at BDO, said: “Assuming that South African private sector and quasi- private sector companies are losing just 5% of annual turnover (extrapolated from nominal estimated gross domestic product of SA), the total annual leakage is R100bn.
“Our experience is that company fraud in SA is escalating at an alarming rate. This is partly as a consequence of our contracting economy and reduced disposable income which is seeing people turn to crime and partly due to less vigilance on the part of companies.”
During the past 12 months Deloitte facilitated an online study among its clients to enable them to assess their organisations in regard to fraud detection, prevention, reporting and basic controls.
“This survey was completed by just fewer than 10 000 participants from more than 20 companies and public sector organisations and yielded some interesting results,” said Mr Dawes.
The study showed 41% of employees were aware of a person in the workplace who had been prosecuted for fraud or dishonesty.
Only 11% knew of situations where controls could be overridden in the workplace with 34% of these saying that it happened continuously. Forty one percent of employees did not know how to identify fraud red flags, but 15% believed that fraud could be happening in their immediate vicinity. Only 15% had attended a fraud prevention and awareness workshop in the past 12 months.
“By facing the problem head on and developing fraud mitigation and response strategies, an organisation is at a definite advantage,” said Mr Dawes.
http://www.businessday.co.za/Articles/Content.aspx?id=121317