2013 Asia-Pacific Fraud Survey

Asia-Pacific risk landscape

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Weak control environment

The risk of fraud, bribery and corruption is greater in rapid growth markets. This may be due to a weak control environment that results in policies and procedures being implemented differently from global compliance frameworks.

Companies operating in local markets may also feel compelled to operate in line with local business culture, resulting in conflicts with global compliance regimes.
 

40% of respondents said their companies have an anti-bribery and corruption policy or code of conduct in place.

Compared with our Global Fraud Survey (81%) and our Europe, Middle East, India and Africa (EMEIA) Fraud Survey (57%), these Asia-Pacific Fraud Survey figures indicate that companies here are still well behind the rest of world.

Employees remain unconvinced of the effectiveness of these policies.

48% of respondents told us that while their companies’ anti-bribery and corruption policy is sound in principle but does not work well in practice.

EY - effectiveness of company policy


Tough times lead to shortcuts

Companies are often under pressure to show positive results to stakeholders regardless of market conditions. This can create a higher fraud risk in volatile markets.

27% of respondents said that company management is likely to take shortcuts to meet targets when economic times are tough.

A number of recent high-profile fraud cases in Asia-Pacific highlight the potential danger of companies intentionally misstating their financial statements.

11% of respondents said that bringing forward recognition of revenue or reducing depreciation costs is a common practice in the countries in which they are based.

 
Perception of fraud, bribery and corruption

The risk of fraud, bribery and corruption in one form or another continues to expose companies to monetary and reputational losses. Developing compliance programs to counter fraud, bribery and corruption within companies has been a key focus for several years, especially in Asia-Pacific’s rapid growth markets.

Our survey indicates a large variation in the perceived risk of fraud, bribery and corruption between different countries in Asia-Pacific.

Not surprisingly, we find that in markets where enforcement of anti-fraud, bribery and corruption laws is more stringent and has been in place for a longer time, the perceived risk is lower.

However we also find that the perception of risk of fraud, bribery and corruption in some countries has increased since our 2012 Global Fraud Survey. In China, for example, 21% of respondents agree that bribery and corruption happen widely, compared with 14% in the Global Fraud Survey.

When economic conditions are tough, there is pressure on management to meet sales targets, which can increase in the risk of bribery and fraud.

There is a clear understanding of the illegitimacy of cash payments to win or retain business, with only 4% of our respondents saying that it is acceptable. However, giving gifts and entertainment to win and retain business continues to be common practice, especially in rapid growth markets such as China (20%), Indonesia (29%) and Vietnam (22%).