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Leslie Kramer
Leslie Kramer
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Corporate Fraud and Misconduct Risks Driven by Pressure to do ’Whatever It Takes’

Fewer episodes reported by companies with ethics and compliance programs

A new study put out by KPMG, an audit, tax and advisory firm said that pressure to do "whatever it takes" to achieve business goals continues as the primary driver behind corporate fraud and misconduct.

Of more than 5,000 U.S. workers polled this summer, 74 percent said they had personally observed misconduct within their organizations during the prior 12 months, unchanged from the level reported by KPMG survey respondents in 2005. Roughly half (46 percent) of respondents reported that what they observed "could cause a significant loss of public trust if discovered," a figure that rises to 60 percent among employees working in the banking and finance industry.

"Restoring trust and confidence in the integrity of our capital markets and institutions will require business leaders to build corporate cultures that reward 'doing the right thing,' instead of 'doing whatever it takes,'" said Richard H. Girgenti, national leader for KPMG's forensic practice, in a press release. "An effective ethics and compliance program is instrumental in reducing the likelihood of wrongdoing occurring as well as reducing exposure to the devastating fallout that can be associated with criminal liability and fines, when fraud or other illegal acts occur," he said.

The survey found that 72 percent of respondents whose companies had no formal ethics and compliance program reported having observed misconduct during the previous year, an increase from 65 percent of respondents in a similar survey in 2005. Meanwhile, in companies with ethics and compliance programs, 55 percent of respondents reported witnessing wrongful activity, a slight improvement from the 59 percent reporting such activity in the 2005 survey. Girgenti added in the release, "A downward market can magnify conditions that give rise to fraud risks, and the KPMG data suggest that managers and employees facing heightened pressure to meet revenue and cost targets may resort to improper means of doing so, especially if they think their jobs are in jeopardy if they miss those goals. With so much on the line, now is not the time for companies to cut back on the very investments that are designed to safeguard their reputation for integrity."

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