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Small and Medium Sized Enterprises fear that they might be more at risk due to financial crisis

An increase in fraud and other forms of financial crime is one of the unfortunate consequences of the current unstable financial environment across Europe, says ACCA’s (the Association of Chartered Certified Accountants) head of business law, John Davies.

Citing recent figures from KPMG's Fraud Barometer, John Davies says there has been an increase in fraud cases - in the first half of 2009 over 160 cases of serious fraud, involving a total of £636 million, were brought before the UK courts: the highest 6-monthly figure in the 21 year history of the KPMG barometer.

John Davies says: “It is a matter of concern that many businesses do not seem to be taking reasonable steps to defend themselves against fraud. According to BDO Stoy Hayward’s research, less than a third of UK businesses have a fraud training programme and 40% do not have any fraud prevention measures in place. The recession may be prompting businesses to cut costs by scaling down or dismantling the internal controls which act as a check on fraud – this could turn out to be dangerously counter-productive.”

SMEs will not be in a position to operate internal controls on the scale of larger companies. But any business, regardless of size, is potentially at risk and should take reasonable precautions to avoid falling victim. Mr Davies advises businesses to look out for the following possible warning signs in the behaviour of their staff:

• Increased levels of stress
• Lifestyle not commensurate with salary
• Personal financial problems
• Reluctance to take annual leave
• Unwillingness to delegate
• Cosy relationship with contractors and suppliers

Companies should also watch out for possible financial indicators of fraud, such as:
• A rise in cash transactions
• Large variations in expense claims between offices
• Poorly reconciled cash expenses
• Rising costs with no explanation, or that are not commensurate with increases in revenue
• Customer complaints and large volume of refunds to customers

Mr Davies suggests that all businesses should adopt anti-fraud policies and these should be communicated to the staff.  New recruits should be screened and internal-anti fraud controls should be implemented and reviewed at regular intervals. 

John Davies concludes: “There is an increasing amount of laws, regulations and guidance on the prevention and identification of fraud and other forms of financial crime, some of which impose significant civil and criminal penalties for non-compliance. On top of this, the process of external audit will assess the adequacy of a company’s internal controls for preventing fraud from occurring. But combating fraud should not be seen simply as a compliance exercise – for any business it should form part of its overall self-defence mechanism.”

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Notes to Editors
1. ACCA is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. We have 362,000 students and 131,500 members in 170 countries worldwide.
2. ACCA has worked with governments, national organisations and development agencies in emerging economies- for over 20 years- promoting the accounting profession, to create value for the communities, businesses and individuals it serves.
3. ACCA believes that globalisation of business means that one set of reporting standards is essential. We favour the principles-based IFRS.
4. ACCA understands the real issues facing small businesses as 63,000 of our members work in SMEs or small partnerships worldwide.

 

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For further information please contact:

Helen Thompson, ACCA Newsroom +44 (0)20 7059 5759 +44 (0)7725 498654 helen.thompson@accaglobal.com