A survey by KPMG Forensic gives Canadian companies a ‘B’ grade in preventing fraud and corporate misconduct.

“A ‘B’ grade is no longer acceptable as organizations now need to work harder to instill confidence in their shareholders, who demand nothing less than an ‘A’ rating,” said Derek Rostant, president of KPMG Forensic, in a news release.

Over 80% of CEOs and CFOs surveyed said that the primary responsibility for fraud prevention and detection should rest in their hands. “While individual fraud is a concern, conspiracies by senior management involving the manipulation of financial statements can lead to the entire collapse of the company,” says Rostant. “A collaborative effort involving upper management at all levels as well as an audit committee would both mitigate the risk of fraud and alleviate investors’ concerns.”

“Clearly, the survey results suggest that Canadian businesses need to be more vigilant and protect themselves and shareholders from the risk of fraud and misconduct,” said Rostant.

While 73% of Canada’s business leaders confirmed that they have a conflict of interest policy in place in their organization, 71% said their employees are not required to sign a conflict of interest declaration. A further 55% of respondents felt they needed to improve the channels for reporting suspicious activity in their organizations.

“Our previous surveys asked organizations how much they had lost to fraud in the past; this survey asks, ‘are you in control of your business environment, or is the ground fertile for fraud and misconduct to flourish?’” says Rostant. “The survey findings suggest that Canadian companies have a bit of work yet before they can claim an ‘A’ status.”

KPMG Forensic suggests the following:

> the audit committee should carry out an annual review of the processes of addressing fraud and misconduct risks

> the committee should conduct an annual sign off at all levels of management to ensure adherence with conflict of interest policies

> the committee should monitor adherence to pre-established standards to determine your organization’s degree of risk and exposure.

The ‘Fraud and Misconduct Diagnostic Survey 2002’ is based on the response of 136 senior executives. The majority of respondents work for organizations that produce annual revenues of $10 million to over $1 billion annually.