Fraud at Senior Management Level on a Rise
Date: Friday , July 01, 2011
A study by KPMG reports that frauds are more likely to be committed by individuals in senior management like finance directors, chief executives and the likes, rather than by those individuals in the junior level.
The recession has made it easier for the individuals to commit fraud, which includes such cases like the mis-statement of financial results, theft and expense abuse. A global analysis of fraud trends by the consultancy suggests that a typical fraudster is male, aged 36 to 45, holding a senior position in finance and has worked for his company for more than 10 years. Compared to women, men are found to be more likely to commit fraud. About 32 percent of the fraudsters work in their company’s finance department, where they get access to corporate assets, financial reporting and credit lines which gives them enough opportunity to commit and conceal their acts of fraud. Other fraudsters are most likely from the executive’s or managing director’s office or in operations and sales.
The economic downturn and the recession forced companies to cut costs in risk management and control, giving the fraudsters a chance to make fake accounts or draw off funds. Their main motivation is their personal greed which is followed by pressure to reach tough profit and budget targets. Philip Ostwalt, Richard Powell and Mark Leishman, the authors of the KPMG report wrote, “Organisations should take some of the blame. For them, it is time to consider how they contribute to fraud when failing to detect or respond to lapses or gaps in controls, or by setting overly onerous targets. There tends to be less fraud in companies that make intolerance of fraud a part of the corporate culture and which set realistic and achievable targets for employees.”
Fraud goes on for the longest in Asia compared with other nations, it took an average of about five years to detect the fraud and sometimes about 16 percent of the frauds go undetected for 10 years or more. While in Western Europe and North America just three percent of fraud goes undetected for 10 years or more. 348 cases from 69 countries were investigated for the research.