Despite checks, balances, audits and controls, companies in New Zealand lost more than $72 million to fraudsters during the first six months of the current year, according to the latest KPMG Fraud Survey.
Fraud continues to be a major problem in medium and large industries in New Zealand but many of them ignore the alarm bell, says the firm’s Fraud Barometer covering the period from January 1 to June 30, 2010.
The total amount defrauded rose sharply to $72 million during this period from $22 million recorded during the corresponding period in 2009.
“In total, there were approximately $100 million of large frauds in New Zealand in 2009. These figures show that there has been no let up in large frauds continuing to occur and brought before the New Zealand courts,” the Survey said.
The KPMG Fraud Barometer is reportedly the first of its kind in New Zealand.
The biannual survey monitors the level of reported frauds brought before New Zealand’s criminal courts, and provides commentary surrounding trends, the types of perpetrators, the victims, and the types of frauds occurring in New Zealand companies.
The Survey takes into account only fraudulent activity exceeding $100,000 and inlcudes only cases in which the prepertraors were at least charged or sentenced.
KPMG Forensics Partner Stephen Bell said Fraud was a constant and serious threat to all sectors of the New Zealand economy, including businesses, governments, non-profit organisations and individuals.
“In light of the economic downturn, these results are not inconsistent with expectations. Businesses should continue to be diligent in their detection and prevention of fraud,” he said.
As in the previous two surveys, those in management positions were more prone to commiting fraud than those in lower levels of the organisation.
“Managers generally misappropriate far higher amounts due to their access to information, authorisation capabilities and ability to understand and override internal controls,” Mr Bell said.
He said the value of fraud perpetrated by those in senior management positions exceeded $1 million (in each case), compared to about $500,000 committed by those in lower ranks.
Mr Bell said frauds involving manipulation of accounting systems continued to be the biggest single fraud threat to organisations.
“This was consistent with previous findings,” he said.
“The prevelance of accounting frauds in the Barometer highlights the fact that it is vital for organisations to conduct fraud risk assessments and strenghten their internal controls.”
The Survey highlighted five types of frauds as the most prevalent in New Zealand companies. They were Accounting Fraud (11), Investment Scam (4), Fraudulent Loans (3), Tax Fraud (3) and Deception (2).
“Top five types of fraud by value of fraud were Fraudulent Loans ($51 million), Accounting Fraud ($9 million), Investment Scam ($7 million), False Invoicing ($3 million) and Tax Fraud ($ 682,000).
The incidence of fraud was low in smaller organisations.
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Fraud Highlights $72 million defrauded in New Zealand in the last 6 months Average size of large frauds continues to exceed $ 2 million per case Managers remain greatest risk to business |
Photo : Stephen Bell
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