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Home > Resources > Additional Resources > Fraud
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Fraud
Fraud and Misconduct Expected to Rise
December 2009-January 2010 The RMA Journal 34
The following are excerpts from the KPMG research paper. The paper can be found at (note it is over 6mb):
http://www.us.kpmg.com/RutUS_prod/Documents/9/fraud-and-misconduct-on-the-rise.pdf.
..Amid a continuing economic downturn, nearly one-third of corporate executives expect fraud or misconduct to rise in their organizations, according to a survey by KPMG. The results were released in late August.
The paper later states that: As many as 32% of the executives surveyed said they expected fraud or misconduct to rise in their organizations in one of three categories: financial reporting, asset misappropriation, or some other illegal or unethical act.
The Fraud Triangle
"Today we have a perfect storm of factors that are creating a toxic brew," said Girgenti, adding that it's all coming together in a fraud triangle.
The first leg of the triangle is economic pressure. "Layoffs, staff cuts, and the need to achieve results in a more competitive environment create pressure on individuals and management. Individual workers feel compelled to perform or else possibly lose their jobs. Many have mount-ing personal debt and financial challenges as a result of mortgages or credit extensions," he noted.
Opportunity is the second leg of the triangle, and Girgenti says the large infusion of federal dollars creates the opportunity for schemes to develop around how to get that money in an inappropriate way.
Rationalization is the third leg. "When people feel the pinch of tough economic pressures, they sometimes rationalize that business has been unfair to them and that they should be able to take advantage of it because other people do," explained Girgenti. "When companies believe they need to increase earnings, they believe they're doing it for the shareholders. That element of rationalization is strong in this environment as well."
The KPMG study found that 65% of executives perceive fraudulent and illegal acts to be significant risks in their industries. These executives reported their expectations by type of fraud as follows:
- 8% said fraudulent financial reporting would increase; 66% said it would stay the same.
- 25% expected asset misappropriation to rise; 60% said it would stay the same.
- 20% said they expected other illegal or unethical acts to rise, while 60% said the level would remain the same.
To read the paper go to:
http://www.us.kpmg.com/RutUS_prod/Documents/9/fraud-and-misconduct-on-the-rise.pdf
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