New York (Dec. 2, 2003) - The nation’s businesses are getting better at uncovering fraud within their respective organizations, according to a comprehensive fraud survey conducted by Big Four firm KPMG.

Some 75 percent of those responding to KPMG’s fraud poll indicated they discovered some type of fraud at their organizations, compared to 62 percent of those responding to a similar survey some five years ago.

KPMG’s 2003 report surveyed executives at 459 U.S. public companies with revenues of more than $250 million, and at state and federal government agencies.

The KPMG poll found that company management is taking a more pro-active approach in detecting fraud through internal controls and internal audits. The 2003 survey showed a rise in internal controls, from 51 percent in 1998 to 77 percent, as the primary means for detecting fraud, followed by internal audit, rising from 43 percent to 65 percent.

Among the other findings of the KPMG survey were:

-  The number of companies who said that they were uncovering financial reporting fraud more than doubled (7 percent in 2003 compared with 3 percent in 1998), with the average cost reaching more than $250 million per episode.
-  The cost of fraud to organizations overall is higher. Some 36 percent of companies participating in the survey reported $1 million or more in costs due to fraud in 2003, compared with 21 percent in 1998.
-  Some 60 percent of companies reported being victimized by employee fraud, almost twice the rate of the next-highest category of fraud.

The survey also found that collusion between employees and outside third parties – for example a vendor offering kickbacks if a company employee buys its product - is a growing problem, with almost half (48 percent) of respondents citing collusion as contributing to fraud, versus 31 percent in the 1998 survey.

However, despite broader implementation of fraud detection controls, 22 percent said they do not plan to implement new controls, even though many companies are still evaluating their internal controls as required by Sarbanes-Oxley.


- WebCPA staff

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