KPMG raises concern over increasing fraud cases in companies

KPMG has expressed concerns over the rising cases of frauds in companies in Nigeria, saying that if measures to curb it are not put in place urgently, it will significantly hurt the companies and also pose a serious threat to the continued existence of business organisations.

Speaking at the KPMG Chief Financial Officers’, CFO, Forum for all Sectors, in Lagos, Mr. Olumide Olayinka, Partner & Head, Risk Consulting, KPMG, said in Nigeria and the global economic landscape, fraud cases are on the rise and five per cent of companies’ revenue are been eroded by such cases.

According to him, an organisation’s ability to foster sustained profitability in the current market conditions is not only to be facilitated by proportional increases in sales but also by managing fraud-related expenses more efficiently than the competition.

He emphasized the need for businesses to minimise the impact of fraud on their activities and operations by establishing effective and comprehensive mechanisms to prevent, deter and detect fraudulent activities.

Olayinka said Board and management of companies should take a stance against fraud, adding that such stance will determine the reactions of its staff, customers and suppliers.

He said the real stance will have a direct effect on its experience of fraud in the future, either through an increase or decrease of incidents.

He disclosed that for fraud to take place in organization, three things must be present, summarizing them as opportunity, motive and rationalization.

He identified inadequate internal controls, lack of effective oversight, absence of proper audit trail, apathy or ignorance, process automation, re-organisation/ downsizing, No real deterrent and complex business structure/ transactions, as factors supporting frauds in any organization.

He disclosed that a fraudulent employee will exhibit a number of traits which include; Change in behaviour/attitude, affording a lifestyle beyond means, Stress, low morale, nervousness, sudden resignation or absence from work for no reason, excessive family/peer pressure, controlling behaviour, drugs/gambling/debt, works odd and long hours, few holidays, grievances and ego.

He explained further that fraud will thrive in an organization where there are processes and systems lapses, ranging from lack of segregation of duties, unusual access/authority, override of controls, lack of or inadequate background checks on employees and third parties, overbearing management style, remuneration package below industry standard, association with customers, vendors and frequent deviations from standard operating procedures.

Also speaking, Mr. Tola Adeyemi, Partner & Head, Audit Services, KPMG, bemoaned the challenges faced by companies in the adoption of the International Financial Reporting Standards, IFRS.

He emphasised the need for expertise and training of companies’ personnel to enable them understand and come to terms with issues involved in the transition and adoption.

He identified the challenges faced by the companies to include lack of expertise and the fact that majority of the companies underestimated the complexities associated with the adoption.

 

 

 

 
Source: Vanguard