Rise in fraud blamed on economy

HARSH economic conditions are pressurising normally honest company directors and employees to resort to fraud to rob their companies, leading accountants claimed at the CPA Practitioners’ Conference 2011.

President of the Institute of Certified Public Accountants Gail McEvoy said yesterday both companies and individuals are experiencing unprecedented levels of debt, adding that anecdotal evidence indicates fraud is becoming a serious problem.

“People lose all rational thought when they are desperate. They become convinced that they can get away with ‘cooking the books’ to cover the magnitude of debt or that they can defraud the company to fund unsustainable personal lifestyles. All accountants and auditors need to be increasingly vigilant to fraud,” she said.

A partner in Friel Stafford Forensic Tom Murray divulged that his firm in seeing increasing demand for its specialist services in two key areas — fraud investigations and asset tracing.

“Unfortunately, difficult economic times can put pressures on individuals which may cause them to take steps that they previously would not have considered — in many cases fraud. Fraud can be perpetrated at every level in the organisation by employees and company directors.

“As companies cut costs to survive, the system checks required to prevent fraud are neglected or done away with, opening up opportunities for people to take advantage of,” he said.

Mr Murray said employing forensic accountants could help determine if a fraud has actually occurred or not.

“If fraud has taken place, the investigation may lead to the forensic accountant given expert evidence in a trial. In such cases the role of the accountant is to provide the court with unbiased or uninfluenced evidenced based on hard facts,” he said.

Mr Murray also said there is a significant increase in demand for the services of forensic accountants in the area of asset tracing.

“In the current economic environment where debts are owed, the debtor may have gone to ground and is avoiding paying the debt. In this instance we are engaged to identify what assets are actually held, whether they are encumbered and what is available to actually satisfy the debt,” he said.