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 NEW YORK, Aug. 16 /PRNewswire/ -- Fraud is a serious and growing problem for much of corporate America, according to KPMG Peat Marwick. More than 75 percent of the companies represented in a recent study were victimized by fraud during the past year. But, admittedly, many of these companies are failing to take additional precautions to stop the growing problem, ignore warning signs of potential wrongdoing and wait for calculated fraud to be exposed through routine controls.
 KPMG Peat Marwick's 1993 U.S. Fraud Survey reveals that fraud is considered to be a major problem by three-quarters of the executives surveyed and their companies expect the incidence of fraud to increase. Respondents from more than 300 of the 2,000 largest U.S. companies reported total losses from fraud exceeding $250 million in the past year. Losses of more than $1 million for the same period were reported by almost one of every four participants.
 According to Michael Carey, director of forensic and investigative accounting for KPMG Peat Marwick, the annual costs of fraud for U.S. businesses is impossible to quantify but is estimated to amount to tens of billions of dollars. The most common fraudulent activities, according to the firm's survey, include the misappropriation of funds, check forgery, credit card schemes and the filing of false invoices.
 The leading contributor to the expected rise in fraudulent activity is economic pressures on individual employees. A weakening of society's valued is also cited as a common cause for fraud. Carey said not only need and greed, but also opportunity helps to explain an expected increase of fraud.
 "White collar criminals are using more sophisticated means -- such as computers and incredibly precise copy machines -- to commit their acts," said Carey. "Nearly half of the executives we surveyed believe that management is inadequately trained to detect and prevent this high- tech fraud or even old fashioned theft. According to 30 percent of our participants, a reduction of middle management is giving criminals added opportunity."
 Despite the economic environment and increased opportunity for fraud, Carey said companies frequently ignore the many warning signs that may indicate a fraud has been perpetrated. Nearly half of those surveyed indicated that early red flags were ignored by personnel or management.
 Some of the warning signs overlooked by respondents had to do with a sudden unexplained improvement in lifestyle by someone whose salary did not support it. Sometimes the clues came from missing bank deposit slips or unexplained cash shortages. In other cases, employees found copies, rather than original invoices were paid and often non-compliance with corporate policies and internal controls were noted once fraud was uncovered. Elsewhere, the potential for fraud was evident because a customer would deal only with one individual in the company --indicating that some kind of kickback operation may be in progress.
 Poor internal controls were cited by 56 percent of respondents as the major factor allowing fraud to take place in their organizations. In a significant number of cases (40 percent) fraud was committed to protect the company's reputation. Sixty-nine percent of the participants said they called the police when fraud was discovered.
 The most common steps taken to reduce the possibility of fraud were training courses in fraud prevention and detection, and increasing senior management's focus on the problem.
 KPMG Peat Marwick is the global leader in providing a complete range of value-added assurance, tax, international and performance improvement services to business and corporation in financial services, manufacturing and distribution, information and communications, health care and life sciences, government and special markets. The firms' Forensic and Investigative accounting practice conducts similar fraud studies in selected countries throughout the world. The combined international results of these studies is scheduled for late 1993.
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 /CONTACT: Joanne Trout or Katherine Cavanaugh of Dorf & Stanton, 212-420-8100, or Barbara A. Kraft, 212-909-5266, or Kevin T. Kelly, 212-909-5108, both of KPMG Peat Marwick/

CO: KPMG Peat Marwick ST: New York IN: SU:

LG-MP -- NYM001 -- 2859 08/16/93 08:01 EDT
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Publication:PR Newswire
Date:Aug 16, 1993

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