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Vigilance is key to countering fraud

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In today's turbulent economic climate, a lot of small and medium-sized enterprises (SMEs) may be exposed to fraud, as they desperately attempt to boost their cash flow and sales. Businesses can minimise their exposure to fraudulent activities if they exercise vigilance and adhere to established standard practices.

According to Nick Robinson, national leader of forensic and dispute services at Deloitte China, there has been an increase in fraud and corruption cases - particularly involving SMEs - aggravated by the economic downturn.

'People are under pressure in a recessionary environment where shortages of cash and funds have driven organisations to move into more questionable areas of financing and funding,' he said.

Although fraud can occur in any industry, at any time and at every level within an organisation, Mr Robinson said that trading, export and supply sectors were more vulnerable to fraud because they relied on the business performance of other companies in the supply chain.

Deviating from standard business practices and internal controls to chase short-term gains could subject businesses to fraud, including employee fraud, according to Chris Lau, deputy president of CPA Australia Hong Kong China division.

Mr Robinson said employee fraud or management fraud could happen at all levels and were triggered by a combination of factors involving cash flow, rationalisation and opportunity.

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