Feeds

Finance managers top company fraud list

Absolute power corrupts absolutely

The essential guide to IT transformation

Company fraudsters often get away with their crimes for five years, committing as many as 50 undetected frauds, according to the forensic department of audit firm KPMG.

The firm has analysed 360 cases in which its forensic department has been involved and found that a third of cases involve more than 50 acts of fraud, while two thirds of fraudsters commit acts undetected for between one and five years. One tenth of fraudsters go undetected for more than six years.

The perpetrators of the crimes are most commonly long-serving, trusted managers in the finance department. Most are employed for six years or more when they commit their first act of fraud, and are motivated by greed and the opportunity presented by their position.

The consequences of single frauds can be devastating, according to the research. The total loss is more than €1m in 42 per cent of cases, it said.

"Companies clearly have a challenge on their hands," said Ken Milliken, head of forensic for KPMG in Scotland. "Over 60 per cent of perpetrators are members of senior management, whose status in the company makes it easier for them to bypass internal controls and inflict greater damage on the company."

Aged between 36 and 55, the typical fraudster is male, operating on his own and working in the finance department. He is a manager whose activities are made possible by weak internal controls.

While management reviews caught 21 per cent of instances, the most common way in which companies found out about fraud was through employees who had found out about the activity and informed the company.

"Given the repeated and extended nature of most frauds, companies need to work extremely hard to detect frauds earlier through tighter internal controls, data analytical tools, and more widely publicised fraud reporting mechanisms," said Milliken.

"Recoveries of losses from fraud can take several years to be completed. Prevention, such as introducing ethics and integrity measures at the top management level, is always a more efficient and cost-effective means."

Companies are rarely open about having suffered from fraud. Two thirds of the firms studied by KPMG issued partial information or none at all about the attacks, and in most cases no public authority such as the police were ever informed. Investigations, it found, were almost always private and internal.

Copyright © 2007, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

The essential guide to IT transformation

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Banking apps: Handy, can grab all your money... and RIDDLED with coding flaws
Yep, that one place you'd hoped you wouldn't find 'em
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
Primetime precrime? Minority Report TV series 'being developed'
I have to know. I have to find out what happened to my life
prev story

Whitepapers

A new approach to endpoint data protection
What is the best way to ensure comprehensive visibility, management, and control of information on both company-owned and employee-owned devices?
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.