The Global Fraud Survey revealed that 76% of global respondents feel their boards are increasingly concerned about their personal liability from fraud, bribery and corruption. In Romania, this level of concern was reflected by 61% of respondents.

Consistent with the indicated level of concern by Romanian boards for their liability arising from fraud, only 62% of respondent organizations in Romania had conducted a fraud risk assessment in the last two years, and only 29% in the last six months. Over the two year period, this figure of 62% was consistent with results for Central and Eastern Europe but below the global results of 72%.

“Given the pressure on corporate resources, prioritizing anti-fraud and anti-corruption efforts is essential. Regularly scheduled assessments of risks in particular businesses and markets are prudent and help those in risk management functions to triage the most pressing situations”, said David Stulb, Ernst & Young’s Global Fraud Investigation & Dispute Services Leader.

What are the fraud mitigation mechanisms?


Considering the mechanisms through which organizations can seek to mitigate their risk of fraud occurring, Romanian respondents indicated education and communication on anti-fraud policy as the most effective step, followed by internal controls, internal audit and management reviews. The Romanian response for education and communication was surprisingly double that for Central and Eastern Europe, although other results were broadly consistent with the region and global results.

How can fraud be effectively detected?


Switching to efforts to detect fraud, Romanian organizations appear to place significant trust in internal audit. In response to a question on the confidence in internal audit identifying incidents and fraud, bribery or corruption 43% of Romanians were very confident and 43% were fairly confident (a combined 86%). As a comparator, in Central and Eastern Europe only 20% and globally only 25% of respondents were very confident. This apparent trust in internal audit to detect fraud is also reflected in survey results on factors likely to prevent and detect fraud.

Given the confidence placed in internal audit to prevent and detect fraud, it is concerning hat 50% of Romanian respondents indicated their organizations strategy for the next year would be ‘focusing on cost control until prospects improve’.

Cost control may hamper anti-fraud activities


To the extent cost control means limiting the resources of internal audit or not undertaking anti-fraud activities, David Smith, Romanian Fraud Investigation & Dispute Services Leader said: “Anti-fraud activities can reduce the financial cost of fraud to an organization through helping to detect existing or reducing the risk of future fraudulent activities occurring. Savings to an organization by reducing the cost of fraud usually far outweighs the cost of undertaking anti-fraud activities”.

Most surprisingly, only 4% of Romanian organizations surveyed had suffered a significant fraud in the last two years. For Central and Eastern Europe this figure was 14% and globally 16%. “This result is inconsistent with other surveys and indicators on the prevalence of fraud in Romania, and also with out experience in assisting Romanian organizations. Two potential explanations are the survey focusing on larger organizations and hence a likely weighting to global businesses with tighter anti-fraud controls and policies, and secondly, a consideration of what is classed as significant fraud,” David Smith added.