NEW YORK, Oct. 16, 2007 (PRIME NEWSWIRE) -- Economic crime remains a persistent and intractable problem from which U.S. companies are not immune, according to PricewaterhouseCoopers' 2007 Global Economic Crime Survey. Fifty-three percent of U.S. companies surveyed reported that they were affected by some form of economic crime in the past two years with total losses of $223 million.
The biennial survey of 5,400 global companies, the most comprehensive study of its kind, conducted in association with Germany's Martin-Luther University, Halle-Wittenberg, found that economic crime is all but universal, affecting companies of all sizes, on all continents and in all industries. While fraud remains problematic -- fraud levels have not dropped in the eight years since PwC initiated this survey -- most companies are confident that their control measures will limit their exposure to fraud in the future. Only 12 percent of U.S. firms consider it likely they will be victims of fraud during the next two years.
While controls are shown to be a substantial component of an efficient crime prevention program, many U.S. companies are adopting a proactive approach to combating economic crime that includes a focus on establishing a strong corporate culture of transparency. Approximately one third (33 percent) of the crime reported arose out of a whistleblower report or other internal 'tip-off.'
"The 'tone at the top' and communication of the code of conduct as an absolutely essential adjunct to an organization's control structure," said Steven Skalak, Global Investigations and Forensics Leader, PricewaterhouseCoopers. "A culture that supports a holistic compliance program together with a clearly understood, and lived, code of ethics, creates the true foundation for an effective anti-fraud program."
Sarbanes-Oxley was also stated as an effective method of deterring crime. Seventy-one percent of U.S. respondents believed that Sarbanes-Oxley is at least marginally effective in detecting economic crime while 61 percent believed it is at least marginally effective for detecting economic crime originating outside of the company.
"Additional steps need to be taken to strengthen the controls following the enforcement of Sarbanes-Oxley," continued Skalak. "While it is impossible to completely eliminate economic crime, we can nevertheless strive to deepen our understanding of such crime, how it can be prevented, and share our knowledge of 'what works and what doesn't.'"
Significant changes within an organization, such as mergers, acquisitions, and global expansion initiatives are likely to increase the risk of economic crime. As many U.S. companies view China as a critical market to be in, the study took a closer look at the increased risks of economic crime associated with China and other emerging markets overseas. Bribery, corruption and intellectual property (IP) infringement were the biggest challenges facing U.S. companies when expanding into other markets. Forty-one percent of respondents operating in China believe they will be the victim of IP infringement during the next two years (with an average cost estimated at $6.5 million -- higher than any other type of economic crime).
"U.S. companies need to fully understand the business culture of the foreign countries in which they operate," added Skalak. "They must consider whether appropriate measures are in place to prevent and detect bribery and corruption and whether they can protect their IP assets."
Other key trends highlighted in the study include:
* Accounting related fraud in the U.S.: This type of fraud has decreased (36 percent in 2005 compared to 13 percent in 2007). This may be a reflection of the impact that Sarbanes-Oxley had on controls over financial reporting. * The profile of a U.S. fraudster: The typical business executive involved is male (68 percent of cases), between 31-50 years old (35 percent of cases) and highly educated (64 percent of cases). Those in senior management continue to be the perpetrators -- with more than 50 percent of fraudsters falling within middle or senior management roles.
"Economic crime is not something to be taken lightly," Skalak continued. "Companies need to tighten their control environments to avoid not only direct financial losses, but also damage to their brand, to staff morale and to relationships with customers, suppliers and other business partners."
Notes to Editors:
1. PricewaterhouseCoopers Global Economic Crime Survey 2007 was
conducted on behalf of PricewaterhouseCoopers and Martin-Luther
University, Halle-Wittenberg by TNS-Emnid in Germany.
The survey was conducted in 40 countries between May and September
2007. Over 5,400 computer-assisted telephone interviews were
conducted with CEOs, CFOs and other executives who claimed
responsibility for crime prevention and detection within their
respective companies. More than half of the respondents (52
percent) are members of the executive board or company management;
43 percent stated that their main responsibility was in the field
of finance.
The companies were randomly selected with preference given to the
1,000 largest companies of a country and the target number of
respondents for each country was determined according to its GDP.
A full copy of the report can be found at: www.pwc.com/crimesurvey
2. PricewaterhouseCoopers Investigations & Forensic Services practice
operates across over 50 countries and can deploy experienced and
knowledgeable teams to manage and mitigate the threat of corporate
crimes and achieve the best possible outcomes. Using in-depth
forensic accounting and corporate investigation skills allows
clients to continue their business, recover lost funds, and halt
further economic losses. The expertise to assist organizations
with investigating and managing the many risks associated with
fraud, abuse and dishonesty comes from the experience of the
international staff and their backgrounds in forensic accountancy,
forensic IT and private sector investigations as well as
regulatory work and law enforcement.
3. PricewaterhouseCoopers (www.pwc.com) provides industry-focused
assurance, tax and advisory to build public trust and enhance
value for its clients and their stakeholders. More than 146,000
people in 150 countries across our network share their thinking,
experience and solutions to develop fresh perspectives and
practical advice. "PricewaterhouseCoopers" refers to the network
of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.