Will Accounting Fraud Increase As The Economy Declines?
9/10/2009

Across the nation, financial experts predict....

Across the nation, financial experts predict an increase in accounting fraud as our economy continues to decline.  They believe that with lower job security, lack of raises and/or bonuses, and diminished morale, our economy will remain in a doldrum for at least two more years.  That being said, employees may be more apt to turn to fraud to pay their bills and make ends meet.  The financial stresses that folks are facing these days could eventually lead them down the path to committing fraud more easily than naught.  And statistically speaking, if our history has any accreditation here, our nation’s financial experts are correct.         

Some may argue that accounting fraud does not increase during times of economic decline, but as situations arise along with rumors, it appears as if there is an increase in fraud.  Data tracked and gathered by the National White Collar Crime Center will demonstrate that the number of arrests for fraud and embezzlement increase during economic downturns. However, it’s not entirely clear that the arrests were from more frauds being committed, or due to some other factor.  Statistics are always a nice tool to have access to, but it must be remembered that they are not always cut and dry. 

Information highways channel news of fraud rapidly throughout the nation.  Regulations like Sarbanes-Oxley allow us to hear more about frauds that are being committed these days, as well as the many technological advances that we experience each year.  And anyone with access to the Internet can get immediate updates to keep up to speed on the rumor mill surrounding it.  Because of the easy accessibility to this information, it may just appear that fraud is on the rise in times of economic depression.      

As we pinch pennies and try to safe-guard our money through these rough economic times, so do companies who wish to remain successful.  To do this, they focus more on cost-cutting procedures, and aggressively pursue fraud cases to recover monies.  In the past, those frauds may have been overlooked or even put on the backburner, but this is not so at the present; so embezzlers beware.  

Even with the large number of financial executives believing there is a higher risk of fraud during poor economic times, many of them fail to act on their belief.  You’ll find that only a handful of those wary executives have taken measures to prevent fraud from happening within their companies, and even less have taken steps to increase monitoring.  With their lack of action being contradicting to their beliefs, it’s hard to place any weight in their convictions on a national scale.    

No one can say for sure that a poor economy is a catalyst for employee fraud.  There is no sure way to prove or disprove either theory.  However, the importance of educating and informing employees of what constitutes as occupational fraud and the consequences that follow if it were committed are a beneficial measure for any company to take.

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