Nearly half of companies worldwide say they’ve been a victim of some form of economic crime over the past two years, an increase of more than 20 percent.
That's according to a recent survey by PricewaterhouseCoopers of more than 3,600 companies in 34 countries, which showed the average financial damage to companies who experienced tangible incidents was $1.7 million. Some 40 percent of companies reported significant “collateral damage” as well, such as loss of reputation, declining business relations, and diminished morale within.
Steven Skalak, global investigations leader for PwC, said he wasn’t surprised by the number of companies reporting they had been victimized, but instead by the number who expect to be victims in the future—only 20 percent.
“History shows us that economic crime is out there, and it’s a constant,” said Skalak. He interprets the low percentage of companies who expect future incidents as a measure of readiness. “There’s been a lot of attention focused on this,” he says. “I think companies are confident in their processes and procedures and hopeful for their success in deterring future crimes.”
A separate survey issued recently by Oversight Systems says U.S. business leaders are skeptical that the recent cultural shift toward institutional integrity and fraud prevention will stick. While the Oversight Systems survey focused specifically on fraud in the United States, the majority of respondents said the current interest in institutional integrity will fade in the next five years or has already begun to fade.
“The finding … foreshadow a real need for continued vigilance among executives toward institutional fraud,” said Patrick Taylor, CEO of Oversight Systems.
In the PwC survey, the firm cites four factors in the increased reporting of economic crimes, which includes everything from fraud, money laundering and bribery, to various forms of financial misrepresentation. The spike is attributed to increased crime reporting thanks to tougher regulations and greater transparency, new risk management controls that are detecting economic crimes, a regulatory environment that encourages companies to disclose and correct problems, and an increase in the incidence of economic crime itself.
No industry or sector was immune from economic crime, whether regulated or not, but larger companies seemed more likely to experience and detect acts of fraud, the survey suggested.
Both surveys are available for download in the box above, right, as is extensive Compliance Week coverage on related fraud issues.
PCAOB Approves ‘06 Budget; Plans To Reduce Corporate Fees
The Public Company Accounting Oversight Board has approved a budget for 2006 that will result in the lowering of the support fees that public companies pay to regulate the auditing process.
The Board expects to end 2005 with a surplus of $74 million, $55 million of which will remain as a working capital reserve and $19 million of which will apply to 2006 operations, said spokeswoman Christi Harlan. As such, the Board plans to assess $109.3 million to public companies in support fees compared with $136.1 million assessed in 2006, the Board said. Fees are weighted to companies based on their capitalization.
At the same time, the Board plans to increase its staff from 427 at the end of 2005 to 536 by the end of 2006, 80 of whom will be field inspectors carrying out inspections of audit firms. The added headcount without increased revenue will be possible because of the $19 million carryover and because the Board will spend significantly less in 2006 on technology, having completed its infrastructure build-up in 2005, Harlan said.