Grant Thornton International applauds UK member firm for taking the lead in fraud detection

David McDonnell, chief executive officer of Grant Thornton International said: "The work of the UK member firm in detecting fraud in its early stages is commendable. Most fraud is caught within a year of it starting because of rigorous controls and top quality auditors doing their jobs well. The research done by the UK member firm of Grant Thornton International demonstrates its commitment to ensuring continuing professional development and to providing high quality services to its clients."

According to a survey of UK auditing professionals conducted by the UK member firm of Grant Thornton International, nine out of ten UK audit partners have witnessed some form of fraud at their audit clients over the past 10 years. However, while just over 10% of these emerge in the public domain, in the vast majority of cases the fraud is spotted in a timely fashion - typically within a year of being started.

The survey also revealed that internal controls were deemed the most common fraud detection measur e (55%), followed by the work conducted by external auditors (33%) and employee detection (10%).

"The number of frauds which emerge in the public domain is merely the tip of an iceberg. Beneath the surface are numerous frauds that, while still damaging, are caught in a timely fashion, typically within a year - by stringent controls, be that on the part of the company or the work of external auditors," said Steve Maslin, head of external professional affairs at Grant Thornton UK.

The most common types of fraud highlighted by the survey's respondents included: accounting (45%); cash theft (27%) and third party collusion (17%) with most frauds, 98%, estimated to be below £10m in value. Fraud is often associated with the theft of cash or assets, but often accounting fraud occurs where managers feel under pressure to deliver a certain result.

One of the most striking results of the survey was the large number of partners who felt that with so much new regulation in recent years, they had been bombarded with "compliance training" with a strong focus on documenting work. What they really valued from fraud detection training was learning from real life case studies: what the auditor did successfully to help prevent or detect a fraud early, and, in those smaller number of cases where the fraud was allowed to continue unchecked, what the lessons for improvement might be. Fraud case study training has always been found to be valuable to the UK firm and it will build on such training in the future.

The survey confirms the view that in most cases fraud is stamped out before it causes major damage to the company. Two recently introduced auditing standards are important measures to improve fraud detection rates. The inherent risk standard requires auditors to get back to making the sorts of comments to management that were made routinely 20 years ago to improve the design effectiveness of internal financial controls; the fraud and error standard also requires all members of the audit team to approach the audit with an appropriate degree of scepticism.

For further information please contact:
Jess Koslow
Senior PR Executive
Grant Thornton International
T: +44 (0)207 391 9564
M: +44 (0)7989358864
E: jessica.koslow@gtuk.com

About Grant Thornton International

Grant Thornton International is one of the world's leading organisations of independently owned and managed accounting and consulting firms. The strength of each local firm is reflected in the quality of our organisation. All Grant Thornton International member firms share a commitment to providing the same high quality service to their clients wherever they choose to do business.

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