2014 Global Fraud Survey

Overcoming compliance fatigue

Reinforcing the commitment to ethical growth

  • Share

Our 13th Global Fraud Survey provides new insights into perceived levels of fraud, bribery and corruption across the world and offers recommendations to companies to effectively manage long-standing and emerging risk.   

Financial statement fraud risk still prevalent

Our survey shows that the risks businesses are facing are not receding. The incidence of fraud and reported levels of corruption are not declining. Six percent of respondents stated that misstating financial performance is justifiable in order to survive an economic downturn. This is an increase from 5% two years ago, and is driven by responses from emerging markets where, in some jurisdictions, a significantly higher proportion of respondents stated that they could justify such actions: in Singapore, 28% thought misstating performance is justifiable; in India, 24%; and in South Africa, 10%.

More than 1 in 10 executives surveyed reported their company as having experienced a significant fraud in the past two years.

Calls for increased scrutiny

Following the financial downturn, consumers and investors have become more aware and increasingly intolerant of corporate conduct they perceive as unethical. As a result, regulators are expected to broaden their remit to enforce good corporate conduct. Businesses appear more likely now to be challenged on any activities that are considered to have been detrimental to consumers or the effective operation of the financial markets.

In this increasingly scrutinized environment, it is clear that fraud at any level of the organization needs to be tackled. What our survey results show, however, is that executives at senior levels are as likely to justify certain questionable or unethical acts as their more junior colleagues. This should be a significant concern given their ability to override internal controls.

Leading in the wrong direction — willingness to misstate financial performance

View infographic

Q: Which, if any, of the following do you feel can be justified if they help a business survive an economic downturn? Misstating company’s financial performance

In general, C-suite respondents are as likely to justify misstating financial performance, but of particular note, CEOs are more likely to justify it than other colleagues (11%).

Our results therefore reinforce the need for compliance programs to fully encompass senior management. The risks posed by these individuals acting unethically have the potential to cause the most serious damage to their organizations.

The willingness of respondents to justify certain activities when under financial pressure shows an interesting correlation with their role.

Bending the rules or breaking the law?

View infographic

Q: Given the pressure that often exists to meet financial targets, which, if any, of the following activities do you feel can be justified to meet those targets?

Bending the rules or breaking the law?


EY infographic showing how senior executives respond to financial reporting under pressure conditions

Q: Given the pressure that often exists to meet financial targets, which, if any, of the following activities do you feel can be justified to meet those targets?

Base: All respondents (2,719); CFO (752); head of internal audit (238); CCO (95); general counsel (181); head of marketing/sales (108).

The “don’t know” and “refused” percentages have been omitted to allow better comparison between the responses given.

×

These findings suggest potential risk areas that need focus because they relate to matters that are less objective and present an opportunity for more subjective judgment.