Senior Management/Board Increasingly Commit Fraud in Companies
A new KPMG survey reveals that business fraud is on the increase, with a significant proportion committed by those with board-level positions. Company bosses are responsible for an increase in fraud across the globe. The KPMG study found that board members at divisional, subsidiary and corporate level, commit nearly one fifth of fraud — an increase from 11 per cent in 2007 — to 18 percent in 2011. Of the various board roles, CEOs account for an increase in committed fraud from just 11 percent in 2007 to 26 percent across the four-year period.
Often long-serving and more senior employees will be better able to override controls and have accumulated a good deal of personal trust, so will be less suspected, and they are most prone to committing embezzlement and/or procurement fraud (these account in aggregate for just over 50 percent of the 348 cases). Examples include false billings by a supplier to fund kick backs to a senior employee; employees accepting bribes from a contractor in exchange for signing off inflated project costs; and supplier collusion with victim company employees leading to overbilling.
Richard Powell, KPMG’s EMA forensic investigations network lead, concludes from the study: "Given the findings from our survey of red flags not being followed up, coupled with increased recessionary pressures, and the impact of the credit crunch, it seems probable there will be a marked increase in the number of as yet undetected fraud cases which will surface over the next couple of years."
It is astonishing that corporate fraud continues to increase and top management is leading the way.