Posted on 01/13/2008 6:38:42 PM PST by DeaconBenjamin
The credit crunch will drive "a dramatic rise" in corporate fraud in 2008 as managers desperate to keep their jobs cook the books, predict experts.
The UK will see an explosion in fraud in service industries such as IT, as well as in commercial lending, says BDO Stoy Hayward's annual report on fraud.
Employee fraud by industry chart
Simon Bevan, author of the report and BDO's national head of fraud services, said corporate fraud increases in an economic downturn as individuals grow desperate.
He said: "Frauds happen in boom times but are more likely to be exposed in a downturn because people start asking questions. Then you get the management cooking the books because they are desperate to keep their jobs." He added that fraud in service sectors would be more common because it is easier to cover up than at companies which sell physical products.
While the number of reported corporate frauds dropped from 295 in 2006 to 267 last year, and their value fell from £1.37bn to £1.04bn, Mr Bevan said that in reality more fraud had been committed but the official figures could be explained because fewer cases were reported to the police.
He said: "Fraud is part of the human psyche, you are not going to iron it out, but the police have scarce resources and corporate fraud is becoming a markedly lower priority."
In further evidence that companies are taking an bigger hit from the credit crisis, an Ernst & Young report found that the number of profit warnings issued by UK companies hit a six-year high in 2007, rising 12pc to almost 400, the highest since the dotcom crash in 2001.
The majority of warnings came in the fourth quarter, with one in five of them explicitly blamed on the credit crunch.
Like there is no fraud in the boom time with no-doc, no money down, subprime liar loans with high commissions that were later sold by wall street...
As a n internet retailer, I have to charge UK people twice as much for shipping, due to a need for tracking. This is because of rampant theft of packages we observed to be strictly a UK problem and not a significant risk elsewhere across the civilized world.
Very interesting. I had never heard that before.
Gee, I thought Italy was the world leader in swiping packages.
I hadn’t realized I had left out the jump cite.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.