Fraud could soon be booming
Philip Fisher sees warning signs suggesting that fraud could become an increasingly worrying trend.
Without trying to set up as an amateur astrologer, this accountant wonders whether the stars are moving into place to encourage fraud across the United Kingdom.
Last year, there was a great deal of publicity about the lax controls around several of the government coronavirus funding packages.
There were suggestions that employers were claiming furlough payments when employees were working. Rumours of widespread abuse of self-employment support also hit the headlines.
The media identified a number of situations in which loan funding was claimed by crooks who were simply using the government as a large-scale fruit machine.
That ignores all of the loan funding that will never be repaid, even if it was advanced legitimately and with the best will in the world.
… and contracts
Since the government is refusing to publish details of the recipients, there is now suspicion that some of the contracts awarded under the pandemic panic measures might struggle to stand up under scrutiny. Whether any is actually fraudulent will only become apparent if investigators discover full details.
However, that was not the primary target of this article.
It is a sad fact that many organisations will be struggling to survive in the current economic climate. Shops have been closed for the majority of the last year, while places of entertainment have fared even worse.
Some will already have gone under, while others will be on the brink of permanent closure. In such circumstances, the temptation to do a little bit of book cooking, play fast and loose with rules or maybe just siphon cash away from the prying eyes of HMRC Inspectors could be overwhelming.
This brings us to the final piece of the jigsaw. As has become increasingly apparent following scandal after scandal, auditors have no legal obligation to identify, let alone cut out fraud.
It has been suggested that, at some point in the future, a change will be made to push the burden of responsibility on to bean counters but that hasn’t happened yet.
This gives a let out, which might be just as well given changes to business practice which had been forced upon us by coronavirus and the wishes of government.
It is sad to have to use that last phrase, but like so many citizens of the United Kingdom, this diligent accountant has lost track of what might be embodied in legislation, what is guidance and what is purely media speculation.
In any event, when most of us trained to be auditors, the standard practice was for audits to be carried out at clients’ premises.
This often proved unpopular, since many internal accountants and members of bookkeeping staff appeared to believe that they were being spied upon. There is nothing like being spied upon to deter anyone who might just be tempted to perpetrate a fraud.
At the same time, much of our methodology consisted not only in poring (and sneezing) over dusty ledgers but also politely asking questions of (in their eyes interrogating) relevant members of the client’s staff.
There can be little doubt that if you talk to someone face-to-face, it is much easier to detect shifty behaviour, dishonesty and general discomfort than when exchanging emails with them, speaking on the phone or even using technological wonders like Zoom or Skype.
It might be adding two and two together and coming up with five but seeing all of these factors coming into play at the same time should make any naturally cautious auditor or tax inspector feel concerned about the prospect that the fraud industry could soon be booming.