Most frauds committed by management: KPMG study

Kolkata, Apr 18(UNI) Most fraud offences are committed by management, according to the findings from the Profile of a Fraudster Survey 2007 conducted by the KPMG.

The first-ever study analysing actual fraud cases clearly revealed that the perpetrators primarily exploited inadequate internal controls for their own benefit-resulting in substantial material and immaterial damage for the company, the report mentioned.

The report revealed, ''The typical fraudster is male, between 36 and 55-year-old. By the time, he starts profiting from his illegal means, he has usually been employed by the company for six or more years. He typically works in the financial department and commits the deed alone. He is driven to crime by a desire for money and by opportunity.'' This report was generated from a study of typical financial fraudsters. The report examined 360 actual cases, which were entrusted to the forensic departments of KPMG in Europe, the Middle East, India and Africa.

The companies, which were questioned for the purposes of the study, were not selected randomly.

Head of KPMG (Forensic in India) Deepankar Sanwalka today pointed out that ''over 60 per cent of the perpetrators were members of top management. Senior managers have access to confidential information and due to their position, it is easier for them to bypass internal controls and inflict greater damage to the company overall.'' The study makes it clear how great the risk for business from fraud was.

He said that both large and small businesses could be affected by this and suffer considerable material and immaterial losses.

As the study shows, fraudsters usually repeat offenders. In 91 per cent of the cases investigated, they commit several offences before they were discovered. The offences were always committed over an extended period--in some 76 per cent of cases, the case goes back more than six months and in 33 per cent of instances, three years or more.

''In India and Middle East, corruption accounted for the most common fraud at 33 per cent followed by theft of cash and theft of other assets at 24 per cent and 17 per cent respectively,'' the report mentioned.

Additionally false financial reporting, embezzlement and kickbacks were also significantly common types of fraud that fraudsters committed.

The report said, ''Analysis of the background situation on the offences was revealing. In most cases, the perpetrators exploit weak internal controls. In these cases, it is not surprising that the offences are usually discovered through anonymous tip-offs they rarely come to light through internal controls.'' UNI