Financial Crime World

Financial Statement Fraud Red Flags Emerge in New Zealand as KPMG Releases 2023 Fraud Barometer

Introduction

The latest edition of the KPMG Fraud Barometer has revealed a steady stream of reported financial statement frauds in New Zealand, highlighting several key red flags that businesses and organizations should be aware of when it comes to financial statement fraud.

Key Findings

  • Company owners and management were responsible for nearly half of all reported frauds.
  • Advisers (lawyers, accountants, bookkeepers) and employees followed closely behind as the most common categories of perpetrators.
  • The majority of these frauds were linked to weaknesses in internal controls, emphasizing the importance of robust governance and risk management practices.
  • The value of large fraud cases has remained relatively steady year-on-year, with a significant reduction from $105.8 million in the previous year to $21.6 million this year.
  • The total number of super frauds (those exceeding $1 million) decreased to three, down from seven last year.
  • The government sector was once again hit hardest by fraud, with Inland Revenue accounting for around 60% of reported cases.
  • There has been an increase in cybercrime-related financial losses, which rose by two-thirds in the first quarter of this year.

Recommendations

KPMG’s Forensic team warns that these trends and red flags underscore the need for all organizations to review their fraud risk management frameworks and internal controls to prevent and detect fraudulent activities. The team offers a range of services to support businesses, including:

  • Fraud Maturity Assessments: Identify areas of improvement in your organization’s fraud prevention and detection capabilities.
  • Risk Assessments: Analyze potential risks and vulnerabilities within your organization to develop effective mitigation strategies.
  • Confidential Whistleblowing Hotlines: Establish a secure and anonymous reporting mechanism for employees and stakeholders to report suspected fraudulent activity.
  • Independent Investigations: Conduct thorough, unbiased investigations into reported fraudulent activities.

Conclusion

The full report is available on KPMG’s website, providing further insights into the nature and scope of financial statement fraud in New Zealand. It is essential for organizations to stay vigilant and proactive in preventing and detecting fraudulent activities to maintain trust and credibility with stakeholders.