Fraud incident reporting continues upward trend; assessment of internal controls such as policy, training, reporting methods, awareness remain important factors
ATLANTA – July 19, 2012 – The Network, Inc., a leading provider of governance, risk and compliance (GRC) solutions, and BDO Consulting, a division of BDO USA, LLP, today announced the first quarter 2012 findings in the Quarterly Corporate Fraud Index™, a comprehensive examination of fraud reporting activity from almost 15 million employees worldwide.
For the first quarter of 2012, the Fraud Reporting Percentage (FRP) increased to an all-time high of 21.7 percent, marking the fourth consecutive quarter of record high fraud reporting. The FRP statistic measures fraud reporting in comparison to all compliance reporting activity from more than 1,400 organizations worldwide, including nearly half of the Fortune 500.
Other key first quarter 2012 findings include the following:
- FRP increased 1.5 percentage points – from 20.2 to 21.7 percent – compared with the same quarter in 2011
- FRP grew only marginally – 0.5 percent – from the fourth quarter 2011
- FRI rose significantly– up 21.7 percent – compared to the same quarter in 2011
- FRI increased 9.1 percent from the fourth quarter 2011
“Overall reporting has increased significantly in the past year, and while some industry studies have shown that ethics reporting tends to decrease as economic conditions improve, we have yet to see that trend materialize,” said Luis Ramos, CEO of the Network. “Given the proper conditions and incentives, employees are more willing than ever to come forward to report fraudulent behavior. However, the reports may reflect fraud issues that began weeks, if not months, earlier.”
Ramos continued: “Our experience has shown that organizations continue to work diligently at identifying and reporting misconduct, as well as leveraging policies and training internally to illustrate what constitutes misconduct and how to report it.”
First quarter comparisons of FRP for the past eight years are as follows:
First quarter comparisons of FRI for the past eight years are as follows:
“Lack of strong internal control measures and the mismanagement of those controls continue to be areas of concern for compliance teams,” said Glenn Pomerantz, partner at BDO Consulting and a Certified Fraud Examiner. “When we look at indicators such as the Corporate Fraud Index, the catch is that the fraudulent activity might have been taking place over a long period of time and isn’t always indicative of what’s happening here and now. That’s why ongoing compliance assessments of current control measures continue to be so important.”
Pomerantz continued, “While the continued increase in fraud reporting indicates that fraud is still prevalent, the Fraud Index also tells us that organizations are doing a better job of creating awareness and training their employees to come forward, and that employees have confidence in their reporting options.”
The Quarterly Corporate Fraud Index is compiled from actual incidents reported by clients of The Network and is analyzed by The Network and BDO Consulting. Two primary statistics make up the Fraud Index: 1) the Fraud Reporting Percentage (FRP) represents the percentage of fraud-related reports versus all reporting activity; and 2) the Fraud Related Incidents (FRI) is a measurement of the volume of fraud-related calls.
Fraud-related incidents reflected in the Fraud Index include reports on corruption, theft, accounting and audit irregularities, misuse of assets, conflicts of interest, and violations of FCPA, UK anti-bribery and SEC legislation.
About The Network, Inc.
The Network, Inc. is a leading provider of integrated governance, risk and compliance (GRC) solutions that enable organizations to mitigate risk and promote organizational compliance. Combining dynamic SaaS-based technology with expert-level services, The Network helps global enterprises protect, detect and correct the risks posed by fraud and unethical conduct. Established in 1982, The Network serves thousands of organizations in every industry, including nearly 50 percent of the Fortune 500. For more information, visit www.tnwinc.com.
About BDO Consulting
BDO Consulting provides litigation, investigation, business restructuring and risk advisory services to clients in the United States and internationally. Their highly experienced and well-credentialed professionals leverage the global industry and accounting knowledge of the BDO international network, providing rapid, strategic advice to assist their clients.
BDO Consulting is a division of BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited. BDO International Limited is a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. http://www.bdoconsulting.com