Procurement takes second place on fraudsters' hit list

12 May 2004
More legal news

13 May 2004

Procurement departments are the second most likely target for company fraudsters, a report by financial investigators KPMG Forensic has revealed.

Only the finance department was more likely to fall victim to fraud than purchasing, which suffered one in eight cases, and many companies were found to have poor controls, easily manipulated by the criminal.

KPMG Forensic analysed the last 100 fraud cases it investigated and found 72 per cent of offences were committed by men and more than half of frauds involved between two and five people.

Almost a third of all frauds involved the theft of more than £1 million and a further 26 per cent of cases concerned frauds of £100,000 or more.

Alex Plavsic, national head of fraud investigations at KPMG Forensic, said: "Procurement is always likely to be susceptible to fraud because it is the way a business spends its money.

"The issue is how procurement can show that it has assessed the risk that some of its people may be compromised in dealing with suppliers."

Plavsic added: "The risk is greater now as we have moved away from traditional procurement processes where we have tenders and a formal process to one where a lot more procurement is being done informally."

A quarter of fraudsters were identified through a management review, with a further 31 per cent caught by whistleblowers. Most thieves were found to be employees who had served the company for between 10 and 25 years.

A third of companies recovered or were trying to recover cash or assets following a fraud.

"This study has highlighted some worrying findings and demonstrates the need for companies to continually review their internal controls," Plavsic said.

"Regular testing of key controls against the risk of fraud will identify any weaknesses in the system, which could easily be exploited by potential fraudsters."


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