New York – Kroll’s recently reported increase in corporate fraud is consistent with Integrity’s observations on the forensic accounting research space over the past years. Our own observations revealed that, that as a result of increased demand, the number of firms offering forensic accounting products and services quadrupled over the past decade. Furthermore, research firms in the space have developed innovative analytic approaches to meet clients’ unique needs.
According to Kroll’s latest Global Fraud Report, businesses losses to fraud increased 20% in the last 12 months, from USD $1.4 million to USD $1.7 million per billion dollars of sales. The report is based on the results of a survey among over 800 senior executives from 760 companies globally. An alarming majority of respondents (88%) reported having been victims of corporate fraud over the past 12 months. Moreover, almost half of respondents (48%) said that fear of fraud has dissuaded them from pursuing business opportunities. The countries with higher fraud incidents are China, where 98% of business have been affected in 2010, followed by Colombia (94%) and Brazil (90%).
Other interesting findings in Kroll’s study include the fact that theft of information and electronic data surpassed physical theft for the first time since Kroll has been monitoring the space. Another intriguing finding is that fraud is more often an inside job. The report reads “in our survey, for those companies that have been affected by fraud in the last year and the culprits identified, the most common fraudsters are equally junior employees (22%) and senior ones (22%). When agents and intermediaries (11%) are added in, the proportion of fraud carried out by those who work for the company in one way or another goes well above half.”
While companies and independent organizations are implementing measures to reduce corporate fraud, investors can benefit from unique offerings in the research space aiming at identifying fraudulent practices. Investors do not need to abstain from interesting investing opportunities in thriving markets such as China, Colombia or Brazil for fear of fraud since research alternatives are available to help them identify and avoid risks.
Integrity’s proprietary data base of research providers currently includes 32 firms that specialize in forensic accounting research, as well as a number of firms that, while not specializing in forensic accounting, offer unique ways of identifying fraudulent activities at the corporate level. Examples of these firms include those offering fraud risk assessment, counterparty risk, deception training, and investigative work. Furthermore, Integrity Research has conducted two in-depth studies tracking the trends in the forensic accounting research space resulting in comprehensive reports published in 2007 and 2009, which serve as a buyers’ guide to investors interested in use this kind of research.
As corporate fraud appears to be in the increase, independent research becomes a more significant tool to investors. Integrity Research will continue to monitor and report new offerings that can aid our clients to track corporate fraud globally.