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Fraud fighter joins forensic accounting division at KPMG

MICHAEL Shanahan has been appointed manager in KPMG’s new forensic accounting department.

He will be a part of the KPMG team aiming to help clients beat corporate fraud, which cost business $239 million between 1997 and1999.

The $239 million figure was arrived at by KMPG in its 1999 Fraud Survey, in which 367 of Australia’s largest businesses participated.

Mr Shanahan says the results of the survey are not surprising given current business practices.

“What we are seeing is a growing prevalence of fraud across the board, it’s not just Australia, it’s worldwide,” he says.

“There are a number of things driving that. Technology is a part of it, but in a macro sense, things like privatisation and globalisation have an impact.”

But perhaps the most dangerous implication to business is found in corporate restructuring – most notably the removal of the middle management layer.

According to Mr Shanahan, middle management has a direct effect on monitoring fraud and plays an integral role in receiving information on suspect employees.

The survey found that employees felt management was responsible for fraud control and was the main recipient of information pertaining to fraud.

“Eighty per cent of fraud is actually perpetrated by employees and management and people with an intimate knowledge of funds,” Mr Shanahan says.

The survey found the majority of frauds was discovered as a result of notification by employees, customers, suppliers, police or anonymous letters.

Senior manager of the forensic accounting division Michael Cashman says while figures in 1999 revealed 57 per cent of business experienced fraud between 1997 and 1999, it was just the tip of the iceberg.

“Perceptions of a company have a bearing and they may not want to report it (fraud) because it may affect share price and image,” he says.

Fraud can be going on undetected and believes the problem to be far reaching and expanding, Mr Cashman says.

“The field (forensic accounting) is growing at a rapid pace. It’s a burgeoning area with many things driving demand.”

And how do you reduce the risk of fraud occurring in your business? Mr Shanahan says there are four basic principles.

“Assessment of risk, fraud control planning, raising awareness, and open channels of communication will help manage fraud risk,” he says.

Mr Shanahan is a chartered accountant and moves back to investigations after spending four years with BankWest in project finance. Before that he spent five years with ASIC.

Mr Cashman was the regional director of the NCA until last year.

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