BDO Financial Investigations Survey – three quarters of businesses conduct financial investigations, survey finds
Almost three quarters of businesses (73%) have undertaken financial investigations within the last five years, in an effort to root out fraud, financial crime, regulatory breaches or accounting anomalies, a survey from accountancy and business advisory firm BDO has found.
The most common issues requiring investigation included financial statement manipulation, cross-border financial investigations and asset misappropriation.
The survey uncovered some wide variation between different sectors. While the charity sector reported the highest levels of financial investigations (90%), it was closely followed by the arts, recreation and entertainment sector at 89%. The wholesale trade sector accounted for the least (50%).
Over two thirds (68%) of financial irregularities involved external parties or collusion between external and internal parties. Almost a quarter of businesses (24%) also reported a rise in international offenders targeting UK victims.
The survey found that these financial irregularities are significantly impacting costs for affected businesses, with average losses equating to 11% of turnover.
Recovery of monies is also proving a challenge with affected businesses only able to reclaim less than a third (32%) of losses, often through legal action or insurance.
Technology is playing an increasingly influential role, with 22% of businesses saying they were targeted by deepfake AI and 19% saying they had experienced security breaches due to cyber-attacks.
Stephen Peters, a forensic partner and head of investigations at BDO UK said: “The impact of financial irregularities on UK business can have a huge impact whether through direct costs, lost management time or reputational damage. Our survey highlights the importance of having robust procedures and conducting swift targeted investigations to prevent and mitigate these losses.
“While technology is playing a more influential role in enabling fraud and financial irregularities, it is also providing solutions, with more than a quarter (27%) of respondents saying they had invested more this year in fraud detection tools such as AI and data analytics.
“Encouragingly, the recent introduction of the Economic Crime and Corporate Transparency Act which makes it an offence to fail to prevent fraud, has spurred many businesses into action, with around half (47%) appointing external forensic accountants or auditors and 55% reporting higher expenditure on investigations and anti-fraud projects.”