Bosses most likley to commit company fraud - report
Managers are the most likely perpetrators of company fraud, with those recently promoted posing the greatest risk, a report claimed today.
More than half (55%) of frauds reported by nearly 400 companies around the world involved managers – 85% of whom had held their position for less than a year, the Ernst & Young report said.
The majority of fraudsters (85%) were on the payroll, while suppliers, clients and organised crime syndicates accounted for the remaining 15%.
The global survey found nearly half (47%) of companies admitted they had suffered a significant fraud in the last year, with nearly one in five reporting more than 10 incidents.
More than half (57%) of the financial losses were relatively small at less than 100,000 dollars (€93,000), but 13% exceeded 1 million dollars (€931,000).
The survey also showed that companies were being recompensed for a greater proportion of their losses than before, with the amount recovered growing from 29% in 2000 to 51% last year.
However, recoveries from perpetrators themselves remained low at 20%, with the majority of companies being recompensed by insurers, banks and suppliers.
John Smart, forensic services partner at Ernst & Young, said transient staff, the growing complexity of organisations and greater access to knowledge via the Internet were all fuelling the risk of fraud.
He added: “As trusted, long-established middle management is downsized around the world, the eyes and ears of the company are becoming blind and deaf to potential misdemeanours.
“Fraud also tends to increase during an economic downturn so companies across the globe should watch out for their surviving senior management – especially those new to management who pose a particular threat.”
The report, entitled Fraud, the Unmanaged Risk, is based on a survey of nearly 400 companies ranging from multinationals to small-to-medium enterprises in more than 30 countries.
