Association of Certified Fraud Examiners (ACFE) has stated that the challenging economic climate is, unsurprisingly, leading to an increase in corporate fraud.
The Association however, in a report highlights how company layoffs are "leaving holes" within control systems and firms are not using enough resources to combat these increased risks.
The study shows that 88% of Certified Fraud Examiners (CFEs) expect a slight or significant rise in fraud over the next 12 months while only 22.2% have increased spending in the last year on preventative controls.
The Finance News Line of the Controllers' Leadership Roundtable has done resarch indicating that slow economic times bring increased incidences of fraud and employee misconduct, so it is important to make explicit where there is zero tolerance for bending the rules.
Five indicators in particular are the best predictors of likely misconduct at most large companies: 1) A culture of retaliation and discomfort raises concerns;
2) colleagues willing to compromise values for power and control;
3) direct manager lacks trust in and respect for employees;
4) percentage of variable compensation (an increased percentage increases the likelihood of misconduct, especially for senior executives);
5) employees' commitment to job greater than commitment to company.
The report by the Association of Certified Fraud Examiners
Controllers' Leadership Roundtable