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Survey finds fraud on the rise

By: Peter Gosnell
10 January, 2011

In August 2010 Victorian woman Sonya Causer pleaded guilty to stealing $20 million from her employer.

Her guilty plea came little more than three years after the mother of two was promoted to the position of payroll manager at the firm where she had worked since 2004.

Along with a higher salary came the temptation of being a signatory to various company accounts and within six months Causer had succumbed, embarking on an 18 month crime spree during which she transferred enough company funds to her own accounts to buy 44 investment properties and three motor vehicles.

Her August guilty plea, while helpful, would have been more welcome if the company that had employed her, national electrical retailer Clive Peeters, hadn’t been placed into administration three months earlier with debts of $38 million.

Sonya Causer’s case is an extraordinary one but if the latest KPMG Fraud & Misconduct Survey is any guide, less spectacular versions of the crimes of Sonya Causer are rife and as many as two thirds go undetected.

The biannual KPMG survey released last month canvassed more than 2100 organisations in the private and public sector. The findings are based on 214 usable responses.

Over the survey period – from February 1, 2008 to January 31, 2010 – business and government reported losing $345.4 million to fraud.

This represented an almost 15 per cent increase in losses when compared to the previous survey.

KPMG said: "The average loss from fraud by each organisation experiencing at least one incident of fraud rose from $1.5 million in 2008 to $3 million in 2010, and the average number of frauds increased from 530 in 2008 to 813 in 2010."

The survey also found that fifty-three percent of respondents experienced at least one incident of fraud.

Peter Chapman, director of forensic information technology with accounting and insolvency specialists Ferrier Hodgson said there was reluctance within corporate management to spend money on fraud prevention.

"Many business managers see fraud risk as a negative issue," Chapman said.

"This attitude often sees internal control gaps, flawed business processes, poor security and other fraud weaknesses persist within the business."

Chapman said these lapses "led organisations to often suffer undetected losses over long periods of time, only taking action to remedy fraud weaknesses after a major incident - effectively shutting the gate after the horse has bolted".

He said management had to see fraud prevention as a positive for the bottom line.

The KPMG survey also found that 83 per cent of frauds were perpetrated by employees earning less than $100,000 per annum and that 98 per cent of all losses were accrued from frauds where the perpetrator was an employee and acted alone.

Perhaps most alarmingly of all was that of the 76 per cent of survey respondents who reported combined known fraud losses for the survey period of $281.7 million but estimated that they had suffered total fraud losses of $817 million over the same period. This seems to be an admission that almost two thirds of total fraud goes undetected.

KPMG partner Gary Gill said the fraud levels noted by the survey had increased both in incidence and in value compared with the previous survey due to the global financial crisis.

"We saw more fraud being detected because there was more of a focus on the bottom line," Gill said.

"Boards have been more focused on this sort of stuff and non-executive directors are asking more questions."

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