Many major firms still misrepresent their financial performance in an effort to meet growth and profit expectations, despite increased compliance programmes, according to this year’s fraud survey issued by Ernst & Young (E&Y).
The firm’s annual study, which surveyed over 3,000 board members, managers and their teams in Europe, the Middle East, India and Africa, found that at senior manager and board level 42% of those asked said that sales or costs had been manipulated at their company with the knowledge of senior management, while 57% believed that bribery and corruption were widespread in their country, including the financial services sector. The latter figure rose to 67% in rapid-growth economies.
Nearly 94% of respondents in Kenya said that bribery and corruption were common in the country’s business landscape – the highest of any individual country surveyed by E&Y. In Nigeria, 68% of respondents said that companies resorted to inaccurate reporting, the highest in the list. In India, nearly third of the respondents agreed that bribery and corruption were commonplace in the country’s businesses and 54% agreed that Indian companies were prone to manipulating their figures.
In the UK, 75% of respondents agreed that managers were under increased pressure to deliver good financial performance over the next 12 months. Although 37% of UK respondents believed that bribery and corruption were common in business in the country, only 27% of the respondents said that UK companies resorted to manipulating their results.
“Companies in today’s challenging market environment face sustained pressure to meet growth and profit expectations and some will inevitably succumb to unethical behavior,” said Michael Faske, Swiss leader of Ernst & Young’s fraud investigation and dispute services practice. “Shareholders expecting management to take ownership and to implement compliance programmes is simply not enough. Boards must challenge management to ensure that they are focused on the right high-risk areas.
“The survey reveals a worrying trend that many businesses are either ignoring or are blind to these risks. Employees see bribery and corruption happening widely in their country but do not acknowledge it as a risk in their own business or sector. The results seem to say everyone else is doing it, but not me or my business.”
The survey’s results suggest that firms could fare better if they revisited their anti-bribery and anti- corruption (ABAC) policies as nearly half of the sales staff across the board do not consider existing policies relevant to their role.
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