A study has found that reporting of revenues before they should be recorded is the UK’s most common business fraud.

With more and more UK workers under “extreme pressure” to meet targets, reporting of revenues before they should be recorded to meet short-term targets tops the list from professional service firm Ernst & Young, alongside under-reporting of costs and customers being required to buy unnecessary stock.

A financial analyst specialising in the recruitment sector tells Recruiter that troubled recruiter Healthcare Locums was a “perfect example” of the problems created by such premature reporting. In 2011, a forensic accounting investigation found that the company had undertaken similar “aggressive accounting procedures”.

“That’s how all their problems started,” the analyst says. “They started booking revenues against people they were bringing into the UK,” when the individuals in question had not yet been fully cleared to work in the country.

Ernst & Young’s ‘2013 Europe, Middle East, India and Africa Fraud Survey’ of 3,000 senior figures from businesses in 36 countries shows that downturn-induced pay freezes or cuts and intense demands are putting more pressure on UK employees to commit fraud across the board.

In particular, 58% of respondents in rapid growth markets said they considered unethical practices justified if they help a business survive an economic downturn. This is a challenge for UK companies expanding in such countries, as more than a quarter of respondents in rapid growth markets agree their domestic enforcers regulate foreign businesses more closely than local ones. 

John Smart, partner and UK head of Ernst & Young's fraud investigation team, comments: “Shareholders expect management to take responsibility for protecting the business by implementing proper processes at all levels of their organisation. Boards must challenge management to ensure they are focused on high risk areas.”