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Fraud Busters

A combination of SOX, whistleblowers and a culture of transparency are leading to a lower percent of companies reporting accounting-related fraud in the U.S.--but unhappily bigger average losses

By Staff Writer | Updated on November 06, 2007

Now that the noise has died down and fewer executives are complaining about the expense and pain of implementing Sarbanes-Oxley measures, there’s news that the SOX rules appear to have played a role in slashing potentially one of the biggest risks a company can face–accounting-related fraud. According to a recent survey by PricewaterhouseCoopers, accounting fraud in the U.S. decreased by almost two-thirds–with 13% of responding companies saying they experienced it, down from 36% in 2005 when the consulting firm last conducted the poll of senior executives.

SOX controls contributed significantly to the drop, says Steven Skalak, global investigations leader for PWC, but henotes that interviews indicated that just as important was the new risk management climate that has encouraged a more proactive approach and a strong corporate culture of transparency. “The tone at the top and communications of the code of conduct is an absolutely essential adjunct to an organization’s control structure,” says Skalak. “A culture that supports a holistic compliance program together with a clearly understood, and lived, code of ethics, creates the true foundation for an effective anti-fraud program.”

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