1
The current economic environment and the difficulties presently
facing many Australians and organisations alike, has been
well documented of late. However, will a slowing economic
environment result in an increase of fraud?
When considering if there is a direct link between a slowing
economic environment and an increase of fraud, one must consider
the underlying motivations of why people commit fraud.
The BDO Not-for-profit Fraud Survey released in 2008 indicated
that the two most common motivations of fraud were financial
problems and pressure (representing 28% of reported cases),
followed by the desire to maintain a lifestyle (representing 16% of
reported cases). See figure opposite.
The results of the Association of Certified Fraud Examiners `2008
Report to the Nation'
1
indicated that the two major motivations
and behavioural patterns underlying fraud was individuals living
beyond their means which represented 38.6% of cases reported,
and individuals facing financial difficulties representing 34.1% of
cases reported. See table below.
Do organisations need to be more vigilant
against fraud in the current economic climate?
With the two major motivations for fraud being financial
pressures and individuals living beyond their means, it only
stands to reason that organisations should be more vigilant in a
slowing economy, particularly when individuals are experiencing
increased financial pressure.
In short, we would always recommend that organisations be aware
of fraud and do everything in their control to implement both fraud
detection and prevention measures.
Detection controls will help detect a fraud after it has occurred,
while prevention controls will help prevent fraud from occurring.
Regardless of the size of an organisation, being proactive against
fraud is imperative.
Further tips to enable an organisation to develop a proactive
approach against fraud are as follows:
1. The development of a Fraud Control Policy and Whistleblower
Policy;
2. Undertaking a Fraud Risk Assessment at least every two
years; and
3. Review controls regularly.
In particular, the review of controls (and the processes surrounding
them) is important for any organisation.
It is not uncommon for organisations both large and small to
consolidate job positions and/or not replacing staff that may have
ceased employment or moved to other areas of the organisation
during economic downturn.
Furthermore, organisations may be forced to decrease the number
of staff employed, and therefore should be aware that there will
potentially be a decrease in the segregation of duties, especially in
rise of FrAuD in the current
eConoMIC ClIMate
andrew howard, manager, forensic services, BDo Kendalls
FiNaNce
Behavioural red Flag
# of cases
pct. of cases
23
Median loss
Living beyond means
370
38.6%
$250 000
Financial difficulties
327
34.1%
$111 000
Wheeler-dealer attitude
195
20.3%
$405 000
Control issues, unwillingness to share duties
179
18.7%
$250 000
Divorce / family problems
164
17.1%
$118 000
Unusually close association with vendor / customer
146
15.2%
$410 000
Irritability, suspiciousness, or defensiveness
130
13.6%
$180 000
Addiction problems
128
13.3%
$225 000
Past legal problems
83
8.7%
$184 000
Past employment-related problems
76
7.9%
$163 000
Complaining about inadequate pay
70
7.3%
$132 000
Refusal to take vacations
65
6.8%
$250 000
Excessive pressure from within organization
62
6.5%
$388 000
Instability in life circumstances
47
4.9%
$58 000
Excessive family / peer pressure for success
40
4.2%
$90 000
Complaining about lack of authority
35
3.6%
$120 000
behavioural red Flags present During Fraud scheme sorted by Frequency
1 "2008 Report to the Nation. Copyright 2008 by the Association of Certified Fraud Examiners, Inc."
(p. 183, 2008 report to the nation)