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April 28, 2010

Fraud to increase: Deloitte poll

There will be rise in financial statement fraud over the next couple of years, according to a Deloitte US webcast survey of 2,100 business professionals.

More than half (56 percent) of respondents predicted the increase while 46 percent blamed the recession as motivating force.

Just under half (45 percent) of participants said it is becoming harder to assess fraud risks because of changes in the risk environment. About one in ten respondents believe picking up fraud will get easier.

The survey, Reducing Financial Statement Fraud Risks: Ten Things You Need to Know, found that revenue recognition manipulation is of greatest concern, followed by ‘big bath’ write-offs while expectations are low, and accounting manipulation for debt covenant compliance purposes.

“Our respondents recognised that changes in the risk environment have made it harder to assess financial statement fraud risks, but that’s the first step in controlling them. Enhancing fraud risk management is a key part of how companies can more effectively mitigate risk and protect shareholder value,” said Toby Bishop, director of the Deloitte Forensic Centre.

Respondents said additional training, improving tone at the top and improving fraud risk assessments are the most useful actions for mitigating fraud risk.

The financial services industry was deemed to be at greatest risk.


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