Industries experiencing the greatest risks for potential accounting fraud during downturns include: computer, retail and other service industries such as telecom and healthcare. Historic fraud schemes during a downturn include manipulation of revenue recognition, reserves and inventory or cost of goods sold. Additional potential fraud schemes in this economic downturn may include improper or omitted disclosures in financial statements and Foreign Corrupt Practices Act (FCPA) violations.
To prepare for the risks that a downward economy poses, 45.7 percent of respondents indicated their organizations have established protocols for conducting investigations.
Executives also report that fraud awareness training throughout organizations (38.7 percent), more robust fraud risk assessments (21.5 percent) and expansion of internal audit monitoring efforts (20.3 percent) would most assist their organizations' fraud prevention efforts in the face of the current economic environment.
"Strong anti-fraud programs and controls can reduce fiscal, investigative and reputational costs," said Donna Epps, partner and national leader of Deloitte Financial Advisory Services' Anti-fraud Consulting practice. "It is important that controls are created, implemented and monitored to mitigate fraud. Clearly communicated, written guidance helps promote an integrated fraud prevention program across all levels of an organization."
