Jul 17th 2011
Are you more at risk for fraud? The percentage of reported corporate frauds compared with all other reported incidents increased to 20.3% in the first quarter of 2011, according to data from 1,000 organizations worldwide.
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Of the approximately 30,000 ethics and compliance related reports, 6,100 concerned accounting and auditing irregularities, embezzlement, kickbacks and other forms of fraud.
The first quarter results are slightly below the all time record for fraud reporting which took place in 2009. One thing to keep in mind with this kind of reporting is that the fraud is only reported during this period and most likely the actual fraud started months or years ago.
Many businesses are now starting to feel a little recovery after several years of cutting costs and just surviving. Owners and shareholders are ready to get their just rewards for all of their struggles they have dealt with in the past. They have shown their businesses survived the lagging economy while providing jobs throughout the recession for all their workers.
In most instances these rewards are justified. During the worst of the economy owners and shareholders were the ones to feeling the pinch more than the salaried and hourly workers so it makes sense the rewards would hit the owners and shareholders first.
With the fraud reporting uptick I have to ask the question; does the above paragraph reflect hourly and salaried employees’ take on the situation. I think in the minds of those employees they feel:
- They suffered as well with loss of retirement funds, bonuses and salary increases.
- They deserve as much reward as the owners and shareholders because without them the business would have closed or would have not functioned as well.
- They feel entitled.
So the with those two mind sets I have to wonder if the uptake is a result of increased revenue, loss of segregation of duties due to downsizing, the appearance of rewards for the owners and shareholders and the feeling of entitlement for the hourly and salaried employees. Are employees thinking “If the boss can take a reward, why can’t I?”.
Owners and Shareholders need to be sensitive of the situation. A little sensitivity and some internal controls will go a long way in changing the mind set of would be fraudsters.
An internal control review is a good place to start for your organization. Please contact me if you would like more information.