Economic uncertainty could increase internal and external corporate crimes committed in the Middle East and globally
Companies in the Middle East and worldwide have an increased risk of falling victim to financial fraud within their organizations, according to a recent survey by Deloitte on internal audit fraud.
The economic downturn of the last two years has brought a number of high profile frauds to the surface, and in so doing, has created a heightened sense of awareness of fraud risk.
According to the report, The Inside Story: The changing role of Internal Audit in dealing with financial fraud, the main drivers behind these crimes in the Middle East and globally-- of which the most prominent are misappropriation of assets, improper expenditures and procurement fraud - are as much internal as external and are a result of ineffective internal audit controls, collusion between employees and third parties, disgruntled employees/management and other external pressures.
Simon Charlton, Middle East Managing Director, Forensic and Dispute Services, Deloitte Corporate Finance Limited said: "Many organizations within the region tend to consider fraud risk from an external perspective only where, for example, they might fall victim to schemes perpetrated by organized crime and third parties. The reality is that internal fraud is a significant risk too."
Although two-thirds of the companies surveyed recognize that the economic downturn could increase fraud and hence, that they should enhance monitoring, some are under the false assurances that their internal audit systems are adequate whereas in natural fact, they are under-staffed and under-resourced, without the required skills and training.
Hani Khoury, partner, Enterprise Risk Services (ERS), Deloitte Middle East, reiterated: "Although 75% of the companies surveyed have in-house Internal Audit resources, many of them are walking a dangerous tightrope. Many senior executives within companies in the Middle East believe that Internal Audit is providing assurance in respect of financial fraud risk assessment, detection and investigation, and yet the reality is that Internal Audit is constrained substantially in its ability to deliver this broad remit."
It is expected that disgruntled employees and management will pose the greatest fraud risk in the coming months, especially with deteriorating social and economic conditions globally. The report cautions that businesses would be advised to keep vigilant in this area.
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About Deloitte & Touche (M.E.):
Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is the first Arab professional services firm established in the Middle East region with uninterrupted presence for over 85 years. Deloitte & Touche (M.E.) is among the region's leading professional services firms, providing audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with over 2,400 partners, directors and staff.
Deloitte & Touche (M.E.) is a 2009 Hewitt Best Employer in the Middle East and was recognized as the 2010 Best Consulting Firm of the Year in the First Complinet GCC Compliance Awards. Deloitte is a Tier 1 advisor in the GCC region (International Tax Review World Tax 2010 Rankings).
© Press Release 2011
