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Accountancy fraud hits record high in ‘naughty noughties’

KPMG’s latest Fraud Barometer reported that the UK
accounting industry was badly affected by fraud in the last year with £1.3bn of
fraud committed in 2009.

Thirty-three cases relating to accounting and book-keeping fraud worth £44m
went to court in 2009. Many of the people committing the fraud had worked for
their victims for years and were trusted by their employers.
KPMG
referred to the example of an accountant in a Birmingham-based property
management company who stole more than £350,000 by transferring money from
clients into his own name.

The audit firm said that such trust had led to the relaxing of controls and
oversight.

Hitesh Patel, partner at KPMG Forensics, said it was essential companies
rigorously screened potential employees and carried out background checks,
adding that knowing who you employ “and the extent of any risk they pose to the
organisation is a key line of fraud defence. The last decade could be dubbed the
‘naughty noughties’.”

The rate of fraud in general across sectors such as mortgages reached its
highest level in more than a decade. Over the past decade there were 1,750 cases
of serious fraud compared with only 700 cases in the 1990s. More than £7bn of
fraud cases were brought to court in the past ten years, compared to around £5bn
in the 1990s.

Patel said the credit crunch had aggravated the situation. While he believes
fraud will never be eradicated, he added that more cases were being brought to
court as a result of companies becoming better attuned to the signs of fraud, a
greater focus on corporate governance and the introduction of new laws and
regulations to combat fraud. “What we see is only the top of the iceberg,” Patel
said. “Fraudsters will only get more sophisticated.”

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