Over the past several weeks of 2003, a number of high profile corporate titans - ranging from Credit Suisse First Boston's Frank Quattrone to Tyco's Dennis Kozlowski, were finally brought to trial to face charges of white collar crime. With a number of additional trials involving corporate executives set to start in 2004, the focus on corporate fraud will continue to increase this year. This visibility is likely to lead to additional frauds being uncovered in corporate America.
The Fraud Investigation and Recovery Services Team (FIRST) at BDO Seidman LLP, the national accounting firm, has compiled the following outlook on corporate fraud for 2004:
- Proactive Boards. Media attention and increased governments regulations will focus corporate boards and their committees on taking a more active roll in policing management.
- Improved Audit Communications. Audit committees will work more closely with outside auditors to look for instances of irregularities involving revenue recognition, purchasing and accounts payable that may identify fraudulent activity.
- High Tech Defense. Computer forensics will increasingly play a lead role in most fraud investigations as criminals attempt to use the latest technological advances to stay one step ahead of law enforcement.
- Emboldened Whistleblowers. As the media shines its' light on unacceptable behavior and businesses create corporate cultures that reject questionable ethical practices, rank and file personnel are increasingly likely to take action as whistleblowers.
- Employee Lawsuits. There will be an increase in litigation involving companies who fail to put in place procedures for the confidential receipt, retention and treatment of complaints, and retaliate against whistleblowers.
- The Trickle Down Theory. Fraud not only occurs at Fortune 500 companies, but just as often, and with more detrimental effects, at smaller institutions. Given the plethora of criminal prosecutions taking place at some of America's most prestigious corporations, these smaller business will be less likely to sweep the damage from rogue employees under the rug and more likely to prosecute.
BDO Seidman's FIRST practice is comprised of former FBI agents, certified fraud examiners, and other investigative personnel that assist numerous businesses in fraud prevention and recovery of stolen assets.