More employees report fraud


The Network and BDO Consulting have released their most recent Quarterly Corporate Fraud Index, which is compiled from actual incident reporting activity among 1,400 organizations, including half the Fortune 500 and 15 million employees.

The results are interesting. For the fourth quarter of 2011, the Fraud Reporting Percentage (the percentage of fraud-related reports versus all reporting activity) increased to an all-time high of 21.6 percent, which makes three consecutive quarters of new all-time highs. In addition, the FRP increased 2.0 percentage points--from 19.6 to 21.6 percent--year-over-year. Sequentially, the FRP grew by slightly more than 2.5 percent. The total number of reported fraud-related incidents (FRI) also rose by 15.2 percent, year over year.

So what's going on?

The reporting activity most likely reflects issues that began percolating at companies years ago, as there is a lag time between specific activity and the subsequent reporting of that activity. The Network also notes that  "the upward trend in fraud reporting may actually indicate that organizations are working harder than ever to fight the risks posed by fraud. A key to detecting fraud is to have a workforce willing to report it to you by creating a culture that does not tolerate retaliation."

At the same time, whistleblowers have gained prominence in the media and may be sparking more awareness by employees. It is incumbent on companies to grapple aggressively with reported incidents.  If legitimate reports do not generate a response from management, the next step for many employees just might be to take their concerns to outsiders--something that various laws like Sarbanes-Oxley and Dodd-Frank encourage.

For more:
- here's the study

Related articles:
Professional whistleblowers possible
State of financial reporting trickery



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