Tool Box
Issue No. 8 - December/ 2002/january
Fraud-Proofing Your Business
Checklist to fraud-proof your business
by Frank O''Toole
Detecting fraud
During the past two years, 361 Australian companies reported a total of $273m lost to fraud. The average loss reported was $1.4m. Off-shore operations lost $30m to fraud – a 100% increase over the previous two year period.
These are the stark facts Frank O’Toole, the senior manager-forensic of KPMG NSW presented to the CPA Australia congress 2002 Leading the Way, held in Adelaide during November.
Frank offered a set of useful clues to fraudulent behaviour as well as countermeasures in his presentation, Towards Fraud-Proofing Your Business, which we will run over two issues of in-business. Part 1 deals with cost and clues.
Some 73% of organisations employing over 1000 people experience fraud in some form. The Australian Institute of Criminology puts the annual cost of fraud in Australia at more than $3.5 billion — 16% of the total cost of crime. American organisations lose 6% of annual revenues to fraud and abuse committed by their employees.
The consequences of fraud and corruption can go beyond the immediate loss of cash or confidence in the people involved. The company may also lose sales or market share, access to financing or essential management resources. Litigation may ensue, or vital licenses may be withdrawn or refused. The company’s reputation may suffer. Bankruptcy and liquidation may be real dangers.
To commit the crime, perpetrators of fraud need motivation – most likely to do with greed, reputation or ego – an opportunity at reasonable risk and a rationalisation for what they are doing. Barings Bank perpetrator Nick Leeson claimed that he was protecting staff and had control over both the front and back office.
Professionals are just as likely to commit fraud as anyone else; 21% of all fraud in Australia 1994-98 was committed by solicitors and accountants committed 19%.
As crimes go, fraud is not risky. Armed robbers of American banks stea...
