Overview
Economic crime is a pervasive and growing threat to US and North American businesses of all types.
Our 2005 economic crime study reveals that approximately 25% of US and North American companies believe they are at substantial risk for economic crime in the next five years. Such a modest percentage suggests a high degree of confidence in their control systems despite recent past experiences where more than 50% were actual victims of economic crime.
Among US and North American companies that were subject to economic crime, asset misappropriation touched three-quarters of them. Fraud, the most damaging type of economic crime, touched about half. Internal control systems detected only 41% of these economic crimes. This suggests economic crimes are often schemes based on deceit (and/or collusion) in one of three scenarios: 1) among employees, 2) between employees and outside parties or, 3) by executives of sufficient rank and seniority to override control and risk management mechanisms.
To deter economic crime, continued vigilance through a robust portfolio of internal control measures and an appropriately objective appreciation of management’s ability to override these controls is the most effective course.
Of all the proactive internal control measures that a company can implement, internal auditing is the most effective because it has a degree of independence from management as well as knowledge of a company’s operations.
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