E&Y 2012 Global Fraud Survey

Norman Marks, CRMA, CPA, is a vice president for SAP and has been a chief audit executive and chief risk officer at major global corporations for more than 20 years.


Ernst & Young’s (E&Y's) latest survey (their 12th) is an excellent and essential read for all concerned with the risk of fraud. I especially like the separate sections for different regions.

One word of caution: the report doesn’t quantify the potential impact of fraud or corruption — it only discusses the likelihood of such, and the presence (or otherwise) of the controls and environment necessary to combat it. See this earlier post for a review of the ACFE report on fraud, which does include estimates of fraud impact.

Here are some bits of interest:

  • Companies’ awareness of the risks posed by fraud, bribery and corruption is high, and a substantial majority of these companies are doing many of the right things to mitigate the risks. 
  • On a global basis, 39% of respondents reported that bribery or corrupt practices occur frequently in their countries. The challenge is even greater in rapid-growth markets, where a majority of respondents  believe these practices are common. 
  • Respondents to our survey were increasingly willing to make cash payments to win or retain business, and a greater proportion — including CFOs — expressed an increased willingness to misstate financial performance.

Globally, 15% of respondents are prepared to make cash payments, versus 9% in our last survey

5% of respondents might misstate financial performance, versus 3% in our last survey 

  • Mixed messages are being given by management — with the tone at the top diluted by the failure to penalize misconduct. 
  • Boards are ultimately responsible but, according to our respondents, they are sometimes seen as out of touch with conditions on the ground. 
  • Given the lack of progress since our last report on this issue, it is clear that boards need better and not just more information. Some feel swamped by voluminous risk management and control information and need more tailored, responsive and focused reporting. 
  • Despite the significant risks and specified demands of regulators, our survey suggests that the corporate response to mitigating third-party risks is still inadequate. Many companies are failing to adopt even the most basic controls to manage their third-party relationships. 

E&Y has a number of recommendations for improving controls and the overall environment — worth spending the time to read and discuss with the management team.

I welcome your views and comments.

Posted on Jun 25, 2012 by Norman Marks

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