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As the stunning frauds at Indian tech outsourcer Satyam and by Bernard Madoff shock the investment world, many business executives believe it may not be the last. Sixty-three percent of respondents in a recent Deloitte Financial Advisory Services poll expect accounting fraud to increase in the next two years. “Smaller paychecks, reductions in employee headcount and internal controls, as well as diminished morale, are just a few factors that can open the door to fraud in a down market,” said said Kerry L. Francis, United States Chairman of the Board for Deloitte Financial Advisory Services LLP, in a statement.
Perhaps even more surprising, just 46 percent of respondents said their organizations have set up protocols for conducting investigations into accounting fraud. And just 39 percent think fraud awareness training would assist their prevention efforts in the current downturn, while only 20 percent think an expansion of internal audit monitoring would do the same.
These executives seem either far too trusting of their colleagues (what do the other 54 percent do when there’s suspicion of audit fraud?) or too suspicious of how they’d react just because their paychecks go down. What does everyone else think? Do you think a wave of accounting fraud and irregularities will turn up as the economy worsens? Or will the ebbing economic tide just reveal those places where it’s already occurred?
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