Check and credit are among the most common types of fraud at large U.S. companies, according to a recent survey by an international accounting firm.
The firm, KPMG Peat Marwick, determined that one-sixth of large American companies were victimized by check forgery last year, and nearly one in seven fell victim to some form of credit card fraud.
|Serious and Growing Problem'
"These statistics show that fraud is a serious and growing problem, and an issue that requires greater management attention," said Michael D. Carey, director of KPMG Peat Marwick's forensic accounting unit in New York.
Three hundred and thirty companies, most with annual revenues or assets greater than $1 billion, responded to the survey. Twelve percent were financial services companies.
Two-thirds of the respondents said they were aware of at least one fraud at their company in 1992.
Nearly a quarter of the respondents said that fraud had cost their companies' more than $1 million, while 40% reported losses of $100,000 to $1 million.
The most common type of fraud was misappropriation of funds, reported by 20% of the respondents.
Check forgery and credit card fraud were the second and third most common types of fraud, followed by false invoices, theft, and automated teller machine fraud.
Three-quarters of those companies that detected a fraud dismissed an employee. More than two-thirds of the companies reported a fraud to the police.
Only 43% of the companies that detected a fraud initiated a civil action to recover losses.
The survey respondents attributed 56% of the frauds to poor internal controls, 44% to collusion between employees and nonemployees, 40% to management overriding internal controls, and 17% to collusion between employees or managers.
Two-thirds of the respondents said they expected the incidence of fraud to rise in 1993.
Factors cited as contributing to the increase included economic pressures, a weakening of society's values, and the growing sophistication of criminals.
Mr. Carey said that banks can help to minimize corporate fraud on two fronts.
First. financial institutions can maintain vigilant controls to keep themselves from falling victim,
Banks can also be on the watch for fraud at their clients, particularly customers receiving loans where banks are required to do due diligence.
"Nearly half of the frauds could have been discovered earlier or prevented if the red flags that existed had not been ignored." said Mr. Carey.
Before taking his current post in November. Mr. Carey was assistant director of the London's Serious Fraud Office.
Nearly half of the survey respondents said there were "red flags" that pointed to the possibility of fraud at their company that either were ignored or not acted upon quickly enough.
The warning signs included changes in an employee's lifestyle or spending habits, unusual banking activities, a decline in employee morale, and exceedingly large corporate expenses or purchases.