Last Updated: 04/25/2012
Survey of More Than 900 Auditors From Firms of All Sizes See Huge Fraud Risk
NASHVILLE, TN – April 25, 2012 – More than 37 percent of auditors expect to find fraud among their own clients, according to a new survey of more than 900 auditors conducted by Confirmation.com, the creator and leading provider of secure audit confirmation services.
The survey polled global users of the Confirmation.com system, which includes all of the top 100 accounting firms. Auditors were asked about the perceived risk of uncovering fraud during the annual audit process and more generally about finding fraud within their own practices throughout the year.
While 37.6 percent of respondents expected to find fraud among accounts they audit, they expected competitors to find fraud at a much higher rate: 66.9 – a disconnect between a given auditor’s expected fraud exposure risk and the general expectations for the industry, according to Confirmation.com founder and chief marketing officer Brian Fox.
"Auditors often exhibit this particular form of disassociation bias," said Fox. "They are certain that they would never take on a client who they believe would commit fraud. Since they know fraud exists, they believe it is something that will most likely happen on someone else's watch."
The survey also found that among auditors, the percentage expecting to catch fraud is lower than the percentage thinking fraud will occur within their client base. Fox added, "This is reflective of other research into fraud, which typically shows that external audits historically have been among the least effective means of uncovering wrongdoing-well behind accidental discoveries and whistle-blowing."
Auditors often overlook their own suspicions when sourcing business. While 20.3% of respondents had walked away from a prospect they suspected of fraud, 30.9% had not, and 48.9% had never suspected a prospect of fraud at all. Similar percentages reported firing existing clients because they suspected wrongdoing.
Other key findings of the study included:
Auditors and financial institutions in more than 100 countries use Confirmation.com because the propensity for fraud and the magnitude of those frauds on a global scale are both increasing. By verifying the authenticity of each user, the company's cloud-based solution not only improves the quality of audits, it brings greater investor confidence into the financial statements.