Warning For Businesses To Beef Up Fraud Detection

News Release, 2 June 2008

Warning For NZ Businesses To Beef Up Fraud Detection
In Tough Economic Environment

Less than one third of New Zealand’s privately-owned businesses have anti-fraud measures in place, according to a Grant Thornton International Business Report survey. And a New Zealand internal audit expert says the current difficult economic environment should mean extra vigilance in the workplace.

The New Zealand fraud prevention finding follows a similar result published last week when the same businesses were asked if they had support systems in place for whistleblowers.

“The findings paint a picture of privately-held New Zealand firms not being well prepared when it comes to fraud and other serious matters that could impact on the health of their businesses,” said an internal audit specialist with Grant Thornton New Zealand, Kerry Price of Wellington.

Only 31% of New Zealand private businesses had anti-fraud staffing.

“Globally, the proportion of private businesses having staff in place to detect or prevent fraud averages 45% and in Australia the figure is 40%, so by world standards New Zealand does not show much awareness of the problem,” he said.

New Zealand is in the bottom third of countries surveyed.

Mr Price said that as the global economy weakened and jobs came under threat, the temptation to commit fraud could increase.

“Companies should be extra vigilant in these difficult times to ensure that their business is protected.”

He added that it was important for privately-held businesses to take steps to protect themselves against fraud. Whether specialists were employed or not, processes should be in place to ensure that potentially fraudulent activity was caught in the early stages.

The fraud prevention and detection statistics follow hard on the heels of other Grant Thornton international survey data showing that less than a third of New Zealand’s privately-owned businesses have measures in place to accommodate potential whistleblowers.

That figure is also low compared with the global average in the Grant Thornton survey, which is 45%. But it is six percentage points higher than among Australian privately-held businesses.

“The lack of support for potential whistleblowers is a little alarming and could mean that medium-sized companies in New Zealand are more at risk of being ripped off by dodgy workers than has been assumed,” said Grant Thornton New Zealand spokesman Peter Sherwin.

“It may be a sign of reluctance to rock the boat in mid-sized companies that have smaller workforces, closer boss-and-staff relationships and other such issues to consider. But the effect on smaller companies of rorts and malpractice can be of greater magnitude than in corporates, in some cases potentially having the ability to bring down a business, so it is surprising that more private companies do not have systems in place to support whistleblowers.”

Mr Sherwin said one factor that could influence the New Zealand position was an inherent Kiwi attitude of not wanting to see “dobbing in” develop as a norm.

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