Firms fear procurement scams

24 September 2007
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25 September 2007 | Paul Snell

Just under half of all companies believe they are vulnerable to procurement fraud, a survey has found.

A study carried out by risk consultancy firm Kroll and the Economist Intelligence Unit revealed four-fifths of all firms had been a victim of corporate fraud in the past three years.

While 49 per cent of companies felt their firm was at risk from procurement fraud, just under a fifth fell victim to some kind of supply or purchasing deception.

The report argued that effective procurement processes are central to tackling corporate fraud, particularly in the manufacturing and construction sectors.

In manufacturing, audit managers are increasingly reliant on spend data collected by systems such as e-procurement to identify fraudulent transactions. The data is also useful for "profiling" potentially corrupt buyers, such as temporary workers raising suspiciously high purchase orders, or staff ordering products such as alcohol or audio-visual equipment.

Good procurement is also being used in construction to protect against fraud further down the supply chain with subcontractors. The report encouraged procurement to involve fraud experts to oversee the tendering procedures.

High staff turnover was the most frequent cause of corporate fraud, according to 32 per cent of replies. The survey interviewed 892 executives worldwide.

SMsep2007

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