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Audit Firms Fraud Survey

by msecadm4921

In early 2011, audit firm Ernst & Young’s researchers did 2,365 interviews with employees in 25 European countries. The results suggest that while there has been an increased focus on compliance in the last five years, some companies still don’t see the benefits. As a result, the corporate response to fraud, bribery and corruption continues to face serious challenges.

In 2006, Ernst & Young made its first survey of European organisations to find out employees’ perceptions towards fraud risks and how management and board members were responding to these challenges. Since then, the size and scope of our survey have increased significantly.

The 2011 European Fraud Survey reflects the views of more than 2,300 respondents — from the factory floor to the C-suite — in 25 countries. It contrasts the views found in the mature markets of Europe with those found in the developing markets on matters including:

* Employee perceptions of fraud
* Bribery and corruption
* Companies’ responses to the challenges posed by fraud risks
* The response of regulators and law enforcement.

Companies must be prepared for the challenges posed by greater regulatory scrutiny. However, the E&Y survey suggests that a large proportion remains tolerant of unethical conduct across all levels of organisations:

* Almost one in five company employees, regardless of grade, consider it acceptable to pay bribes to win or retain business.

This is not new. This finding is similar to the results from the firm’s survey in 2009. It does, however, indicate that companies are not making progress in strengthening their ethical culture. This internal change must come, E&Y add, through the establishment of the proper tone at the top of each organisation. The following responses indicate that this will be a major challenge:

* A quarter of our respondents do not trust their management to behave ethically.
* 59 per cent of those interviewed expect management to cut corners in order to achieve targets, and half of management agrees.

Bribery and corruption

The fragile market conditions and the ethically challenged culture of companies may create an environment conducive to fraud, bribery and corruption.

* Two-thirds of those interviewed informed us that bribery and corruption are widespread in their country; a situation that, according to 40 per cent of them, has become worse during the economic downturn.

However, respondents are not as concerned about bribery in their sector.

* Three-quarters of our respondents do not believe that bribery and corruption is a widespread issue in their sector.

If employees believe that bribery is someone else’s problem, there is a very real risk that such unethical behavior will go unidentified and unchallenged. E&Y add that their survey indicates that many companies have a long way to go to address the challenges of fraud and corruption. Fraud remains a very real risk in the current environment, and companies are still failing to address this risk in a robust manner.

Fewer respondents think that their companies have anti-fraud measures in place than two years ago. Almost one company in ten apparently has no anti-fraud measure in place at all.

This indicates a lack of attention to fraud and is a particularly concerning decline given its coincidence with a period of economic slowdown during which the risk of fraud, bribery and corruption is elevated.

* Only 56pc of those interviewed are aware that their company has an anti-bribery policy.
* Only about one-third think that the policy contains clear guidance.

Anti-bribery training has declined at a time when there is increasing extraterritorial enforcement under anti-bribery statutes such as the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. This lack of employee training may expose more of these companies to prosecution.

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