KEY POINTS:
Less than one-third of New Zealand's privately owned businesses have anti-fraud measures in place, according to a Grant Thornton International Business Report survey.
Only 31 per cent of New Zealand private businesses had anti-fraud staff.
Around the world, the proportion of private businesses having staff in place to detect or prevent fraud averages 45 per cent and in Australia the figure is 40 per cent.
According to KPMG's 2006 Fraud Survey, 53 per cent of New Zealand businesses experienced at least one case of fraud, with an average loss of $479,000.
In all, 63 per cent of reported single fraud cases involved values greater than $200,000 and in 42 per cent of the major frauds none of the money or goods stolen was recovered.
The chairman of partners at Grant Thornton NZ, Peter Sherwin, said that as the economy weakened and jobs came under threat, the temptation to commit fraud could increase.
Businesses exposed to the slow-down in discretionary retail spending would feel the pinch and any fraud would have a much greater impact if profits were down.
He said tight internal controls needed to be implemented to check payments were being made to the right people and income was going into the correct accounts.
In a recent case, his firm had been called in after a chief executive'sformerly trusted secretary had been unlawfully channelling income totalling $75,000 into an account only she had access to.
"Medium-size companies do leave themselves open because they are too trusting," he said.
Bigger companies were on greater alert because of a number of high-profile overseas fraud cases.
Sherwin said smaller businesses also needed to be more rigorous with reference checking. Written references were notoriously unreliable. Employers needed verbal references for prospective employees.
Whether specialists were employed or not, processes should be in place to ensure that potentially fraudulent activity was caught in the early stages.
An earlier Grant Thornton International survey showed that less than a third of New Zealand's privately owned businesses have measures in place to accommodate potential whistleblowers.
That figure is also low compared with the global average in the survey, which is 45 per cent. Sherwin said the lack of support for potential whistleblowers was a little alarming and could mean that medium-sized companies in New Zealand are more at risk of being ripped off than has been assumed.
"It may be a sign of reluctance to rock the boat in mid-sized companies that have smaller workforces, closer boss-and-staff relationships and other such issues to consider. But the effect on smaller companies of rorts and malpractice can be of greater magnitude than in corporates."
