Theft Increasing in the Manufacturing Sector

Traditional anti-fraud techniques remain valuable tools to thwart would-be thieves.

Nearly nine out of 10 manufacturing companies have suffered from a fraud during the past three years, according to the 2008-2009 Global Fraud Report, published by risk consulting company, Kroll. According to the report, loss per company was US $8.5 million, which is up 25 percent from 2007.

Physical theft, according to the report, is the largest problem — and a growing one — having affected over one-half of companies in the past three years with compliance breaches, procurement fraud, and corruption hurting one-quarter of manufacturers. As fraud in the manufacturing sector continues to rise, companies are looking for ways to mitigate the risk of theft.

In its report, Kroll highlights several ways to reduce the chances of theft, including staff screening and rotations, conducting a systems and processes review, and performing security reviews. The BDO Consulting Corporate Anti-Fraud Study, published by BDO Consulting LLP, a national professional services firm, notes that traditional anti-fraud techniques, such as conducting criminal and background checks on potential controls, offer the highest value.

"Advance to Go, Collect $800,000," featured in the June 2005 issue of Internal Auditor, offers a real-life example of how a controller's embezzlement scheme almost destroys an established manufacturing company.

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