Feeds

Finance managers top company fraud list

Absolute power corrupts absolutely

Boost IT visibility and business value

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
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
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
Primetime precrime? Minority Report TV series 'being developed'
I have to know. I have to find out what happened to my life
Netflix swallows yet another bitter pill, inks peering deal with TWC
Net neutrality crusader once again pays up for priority access
Judge nixes HP deal for director amnesty after $8.8bn Autonomy snafu
Lawyers will have to earn their keep the hard way, says court
prev story

Whitepapers

Best practices for enterprise data
Discussing how technology providers have innovated in order to solve new challenges, creating a new framework for enterprise data.
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.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
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.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?