Fraud in corporate environment - results of the survey 31 May 2005

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Fraud level and perception

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Experiencing fraud in company The vast majority of the surveyed chairmen (64%) encountered fraud in the last three years.

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Recorded losses 17 % of respondents could not determine losses due to fraud ( %); 3 % of respondents lost over PLN 5,000,000, which constitutes a significant decrease compared to the last year and may be the result of a wider spectrum of the surveyed population. Responses of the surveyed who encountered fraud in the course of their business activity over the last three years

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Fraud level 13 % of respondents did not know the scale of fraud. Responses of the surveyed who encountered fraud in the course of their business activity over the last three years

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Impact and consequences

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Fraud consequences Most often quoted consequences include: lower employee morale; weakened company reputation. Responses of the surveyed who encountered fraud in the course of their business activity over the last three years

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Does fraud in Poland decrease inflow of foreign investments? 68% of the surveyed chairmen believe that there is a strong correlation between the inflow of foreign capital and fraud level.

Fraud detection

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Fraud detection level Fraud in corporate environment is not commonly detected. Only every third respondent who has encountered fraud in his own company believes that fraud detection exceeds 75%. Over 26 % of companies do not know the percentage of detected fraud cases. Responses of the surveyed who encountered fraud in the course of their business activity over the last three years

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. What is fraud detected? Most popular fraud detection methods include: routine supervisory activities of the company’s management; whistle blowing; internal audit.

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Who is responsible for fraud? In most cases, fraud is committed by employees. Responses of the surveyed who encountered fraud in the course of their business activity over the last three years

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Departments most exposed to fraud Sales and procurement departments are most exposed to fraud. Responses of the surveyed who encountered fraud in the course of their business activity over the last three years

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Reporting and loss recovery

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Fraud reporting 49% of respondents disclose losses due to fraud in their annual financial statements (in 2003 – 57%).

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Loss recovery Loss recovery is not common. every fourth respondent declared not to have recovered any losses due to fraud; every third respondent believes that less than 25% of losses have been recovered; only 15% of respondents declared to have recovered more than 50% of the incurred losses. Responses of the surveyed who encountered fraud in the course of their business activity over the last three years

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Regulations

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Are Polish regulations sufficient to truly prevent fraud? Polish regulations are not sufficient to truly prevent fraud.

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Is Polish justice system effective enough in fighting fraud? The prevailing opinion is that Polish law enforcement bodies (police and Public Prosecutor’s office) do not have sufficient means to fight fraud.

Accession to EU vs. level of fraud in Polish companies

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Consequences of Poland’s accession to the European Union The situation has not changed after Poland’s accession to the European Union (75%). Any potential changes would be positive.

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Consequences of Poland’s accession to the European Union (cont’d) Threats: computer crime, money laundering, organized crime.

Fraud prevention

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. How can we help (1) ? Identification of risk areas Understanding and estimating risk scale Creating risk management strategy Implementing strategy and assigning responsibilities Introducing and monitoring controls Forming risk management group and setting goals

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. 3. Investigation 2. Detection 1. Prevention How can we help (2) ?

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Why Deloitte? Our Forensic Services Team– scope of activities: Fraud investigation services. Tracking lost assets. Litigation assistance. Potential fraud reviews (including DTective – a Deloitte methodology). Assistance in development and implementation of fraud prevention policies and procedures. Verification of procedure and policy compliance within money laundering prevention. Business investigative services. Recovery of lost computer data.

Fraud – report presentation © 2005 Deloitte & Touche Sp. z o.o. Contact Maria Rzepnikowska Partner Tel: Fax: Deloitte ul. Fredry Warszawa

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