Purchase dept most vulnerable to frauds: E&Y

Purchase department of a company is most vulnerable to corporate frauds, a survey by consultancy firm Ernst and Young says.

“40 per cent of the respondents revealed that there had been a suspected incident of fraud, misconduct, bribery or corruption in their companies. Purchase was found to be most vulnerable to fraud risk, followed by sales, accounting and warehouse/inventory,” the Fraud mitigation survey 2008 by E&Y said.

Of the 124 management personnel surveyed across various industries, though 76 per cent of the respondents were confident that employees in their companies complied with the code of conduct, only 35 per cent had signed the code of conduct once and 27 per cent had never signed or were aware of such code.

The analysis of survey, E&Y said, highlighted the importance of encouraging employees and external stakeholders to work with the company to mitigate fraud.

Only 59 per cent respondents believed that a code of conduct is useful in preventing and detecting fraud or misconduct.

E&Y said the response emphasises the need for companies to review the relevance of their code of conduct periodically adding that the companies should take constructive steps towards mitigating fraud.

“Establishing a code of conduct is the first step in the direction of effectively reducing fraud vulnerability and setting up a proper tone at the top,” the survey said, adding 96 per cent respondents agreed with the view.

While 86 per cent respondents confirmed that they have a code of conduct in their companies, 96 per cent respondents agreed that companies should have a code.

As may as 97 per cent respondents said they would report anyone suspected of fraud, misconduct, bribery or corruption.