According to PWC’s 2014 Global Economic Crime Survey – US Supplement, the percentage of U.S. companies reporting accounting fraud increased by nearly one-third, from 16 percent in 2011 to 23 percent in 2014. Cybercrime also increased – from 40 percent of respondents reporting such incidents in 2011 to 44 percent in 2014. Bribery and corruption doubled, from 7 percent to 14 percent. In contrast, asset misappropriate fell from 93 percent to 69 percent.
As to the greater frequency of accounting fraud and bribery/corruption, PWC said that it had anticipated these increases “in the wake of more regulation, stricter enforcement, and increasing investigations.” The report also suggests that some of the increase may reflect better detection, rather than more underlying fraud: “[T]he increase in accounting fraud and bribery & corruption may be attributable in part to more companies implementing or enhancing internal controls, more robust compliance programs and increased risk assessments, thus leading to more frauds being detected.”
Taking all types of fraud into account, 54 percent of U.S. respondents reported that their companies had experienced fraud in excess of $100,000, while 8 percent reported fraud in excess of $5 million. Apart from the dollar amount of the fraud, U.S. respondents also cited various indirect company impacts, including
adverse effects on relations with regulators (11 percent), reputation/brand (13 percent), business relations (10 percent), and employee morale (11 percent).
The survey results were based on 5,000 responses from over 100 countries. While the US Supplement analyzes only the responses from U.S. companies, the report does not provide the number of U.S. respondents or the percentage that were public companies.
Comment: In the survey report, PWC offers the following advice:
The Department of Justice (DOJ) and Securities Exchange Commission (SEC) both consider a company’s existing compliance program and cooperation in determining how to resolve investigations. Having a robust compliance and ethics program, self-reporting, providing full cooperation and accepting responsibility often lead to reductions in an organization’s culpability score, possibly reducing fines and penalties. Conversely, unreasonable delays reporting the offense could lead to an increase in a company’s culpability score, and the corresponding fine imposed. Companies have the ability to directly influence the cost of fraud by implementing an effective and updated corporate compliance program, and conducting comprehensive internal investigations once wrongdoing is uncovered.