Pressure on employees to commit fraud grows says Ernst & Young report
PAY cuts, salary freezes and demands to hit targets are putting more pressure on employees to commit fraud, according to the accountancy group Ernst & Young.
Its annual fraud survey of more than 3,000 board members, executives and managers across 36 countries shows that 7% of UK companies workers were aware of financial manipulation in their own company in the past year.
The most common frauds were sales recorded before they should be to meet financial targets, under-reporting of costs, and customers required to buy unnecessary stock to meet short term sales targets.
Victoria Spencer, Yorkshire head of fraud investigations at Ernst & Young, said: “The incentives for unethical conduct can be strong given the pressure on pay packets, job security and demand to deliver growth. At the same time, a focus on cutting costs can also weaken the systems and teams in place to prevent and detect these actions.
“Shareholders expect management to take responsibility for protecting the business by implementing proper processes at all levels of their organisation. Boards must challenge management to ensure they are focused on high risk areas.”
According to the report only 12% of managers were asked to carry out checks on third parties or suppliers, despite the horsemeat scandal. In financial services 9% of executives admitted cases of revenue being recorded before it should have been; 7% were aware of under-reporting of costs; and 9% knew of customers being sold unnecessary products to meet short-term sales targets.
Ernst & Young said 71% of workers at large UK companies have experienced some form of pay freezes, cuts, reduction or scrapping of bonuses, and salary rises below the rate of inflation.
