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Ernst & Young Survey Finds No Let-up In Fraud Levels

Mumbai, February 6: Ernst & Young’s (E&Y) global survey titled “Fraud, the Unmanaged Risk” has revealed that there has been no let-up in levels of fraud suffered by organisations around the world despite attempts to improve corporate governance in the wake of recent financial scandals.

The findings comprise opinions of nearly 400 CEOs in more than 30 countries from a variety of companies ranging from multinationals to small and medium enterprises.

More than half (55 per cent) of the organisations interviewed have suffered a significant fraud in the last two years, and most importantly, it is recently appointed management that poses the biggest threat — 85 per cent of the managers committing the largest frauds had been in service for less than one year.

The biggest offender was company management, which was responsible for 55 per cent of frauds. Further, nearly 20 per cent of the organisations had suffered more than 10 frauds and nearly 50 per cent were frauds of more than $100,000 with 13 per cent exceeding $ one million.Organisations were significantly more concerned about asset misappropriation than any other type of fraud and about half were concerned about computer crime and corruption.

According to E&Y India Country Head (Risk and Business Solutions) Ameet Parikh: “The true cost of fraud goes beyond the financial loss to the impact on reputation, diversion of management focus, morale and loss of trust.”

“Organisations are now at a higher risk of experiencing fraud than before, mainly due to the increasingly complex structures and operations of the organisations coupled with a recessionary environment. As established middle management is downsized or reorganised, the organisation’s risk management framework changes and often does not receive timely and adequate attention,” said Mr Parikh.

However, it does reveal that there has been an improvement in recovering losses, with just over half of defrauded companies reporting that they had been recompensed for their losses, a positive increase since 2000 when only 27 per cent had recovered losses.

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