Fraud in Asia takes longest to detect, says survey

New Delhi: Frauds take longer to detect in Asia as compared to anywhere else in the world, a survey said Tuesday.

The survey - Who is the typical fraudster - conducted by accountancy and advisory firm KPMG analysed the pattern of financial misreporting from 348 cases across 69 countries.

It has found out that the duration of fraud prior to detection in Asia is an average of five years with 16 percent of frauds going undetected for 10 years or more, compared to 4.2 years in North America and 3.7 years in western Europe.

The research also found that "red flag" warnings such as an employee who rarely takes holidays or who leads an excessive lifestyle compared with their income are being dramatically missed or ignored by companies, particularly in the last few years, said a KPMG official.

In 2011, around 56 percent of frauds had exhibited one or more red flags but only around 10 percent of those had been acted upon, compared to 2007 when 45 percent of frauds had exhibited one or more red flags and of those just over half had been acted upon.

"Companies are too focused on the front end (growing the business) rather than the back end (the support functions) so red flags get ignored or treated as one-offs. When frauds blow up, it's typically several years down the line, when the value of the deception has multiplied and all the warning signs have been missed," said Rohit Mahajan, executive director for forensic services at KPMG in India.

As per the data released by the firm, while corporate fraudsters are typically male, 36 to 45 years old (42 percent) they often commit fraud against their own employer.

It also added that typically fraudsters work in the finance-function or a finance related-role (32 percent) often for more than 10 years (33 percent) and usually in a senior management role or board role (in aggregate 53 percent).

The survey also sought that company board members and those working within the chief executive or managing director's offices are increasingly committing more fraud.

Globally board members commit nearly one-fifth of fraud, an increase from 11 percent in 2007 to 18 percent in 2011.

While those in chief executive offices or managing director's offices account for an increase from 11 percent in 2007 to 26 percent across the four-year period.

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