| Fraud low priority for private firms |
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| Monday, 02 June 2008 | |
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Just 37 per cent of private UK companies employ specialists to detect and prevent fraud.
This compares with a global average of 45 per cent and 59 per cent in the US, according to new research released as part of Grant Thornton's annual international business report. Despite the low figures, just seven per cent of businesses said they had increased staff involvement in fraud prevention in the past 12 months, one of the lowest rates in the world. Economic downturn The number of people involved in anti-fraud activity has increased by 12 per cent globally. The survey covered 7,400 owners and senior managers in 33 countries, including 600 in the UK. Phil Crooks, head of assurance services at Grant Thornton, said it was a well documented fact that in times of economic downturn fraud tended to increase. He warned that the figures should be a wake-up call for both the accounting industry and business owners that fraud prevention must be a greater priority. "History shows that fraud is more prevalent when times are hard. Prevention is better than detection, and preventative measures must be tailored to each business's needs,” Crooks added. He said that the coming 12 months would be a good indication of whether the UK had been complacent, or had matched the threat with the appropriate level of resource. Accounting fraud caused by managers under pressure In another recent Grant Thornton survey of UK audit partners, internal controls were deemed the most common fraud detection measure but it seems many UK companies are still not heeding this advice. Crooks said that people often associated fraud with the theft of cash or assets, but pointed out that it is far more common to see accounting fraud caused by managers under pressure to deliver a certain result. “Beyond trying to protect their job, these fraudsters do not actually steal the business's assets, although this can still have damaging effects in the long run as fellow management and owners may not be seeing the full financial picture," Crooks added. Globally, the Philippines is the most fraud conscious, with 72 per cent of private firms having an audit specialist. Conversely Japan and Denmark apparently have the least resource dedicated to the prevention and detection of fraudulent behaviour, with just 17 per cent of businesses having dedicated staff resources to actively preventing fraud. Ken Sharp, Grant Thornton International global leader for assurance services, says that fraud costs businesses billions of dollars each year globally. “Whether specialists are employed or not, processes should be in place to ensure that potentially fraudulent activity is caught in the early stages,” he added. Prevention and detection methods The Philippines not only has the highest percentage of private companies reporting having employees in place to detect and prevent fraud (72 per cent), but those businesses also report the highest increase of those employees (60 per cent), a good example of the high priority many developing nations have placed on prevention of fraud in order to create more investment friendly economies. Crooks called it unfortunate that many UK firms were unsure of the appropriate prevention and detection methods to handle common business fraud. “This goes particularly for misappropriation of company assets and resources as a result of inadequate separation of duties, and misplaced trust on key personnel,” he concluded. Related articles
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