Audit Committee Bulletin: January 2014

Emerging market involvement calls for stronger fraud awareness

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Companies seeking business opportunities in Asia-Pacific’s rapid growth markets may be exposing themselves to unnecessary risks of fraud, bribery and corruption.

Our Asia-Pacific Fraud Survey suggests that companies in the region fall behind their European and American counterparts in implementing fraud policies.

The risk of unethical practices is greater in rapid growth markets than in Europe, possibly due to a disconnect in the local application of policies. Companies operating in these markets may feel compelled to align with the local business culture over global compliance frameworks, which can create conflicts.

“Given the climate of economic austerity, companies operating in the Asia-Pacific and other volatile markets must take a hard look at how to mitigate the risk of unethical practices.” –  Chris Fordham of EYs Asia-Pacific Fraud Investigation and Dispute Services

According to the survey, only 40% of the region’s employees said their companies have an anti-bribery and corruption policy or code of conduct in place. This compares to 81% globally and 57% across Europe, the Middle East, India and Africa, putting companies in Asia-Pacific well behind the rest of the world.

Even among companies who do have anti-bribery and corruption policies, employees remain unconvinced of their effectiveness, with fewer than half the respondents saying that the policies work well in practice.

More than a quarter of respondents also said that company management is likely to take shortcuts to meet targets when economic times are tough.

Detecting and preventing fraud — key findings

  • 78% of respondents agreed that using technology to examine all transactions across the company would result in better fraud detection and help prevent corruption.
  • Only 32% of respondents, compared with 53% globally, said that their companies have a whistle-blowing scheme, whereas 81% in Asia-Pacific said that they would be prepared to use this procedure.
  • Only 26% believe that government efforts against bribery are working. Companies still want governments to do more.

Questions for audit committees