Forensic accounting must be more robust

IN JUNE 2009, Bernie Madoff, a former chairman of the NASDAQ stock exchange, was sentenced to 150 years in prison for operating the largest Ponzi scheme in US history. Over the course of several decades, he had systematically defrauded investors of up to US$65 billion, engaging in illegal activities including securities fraud, money laundering and making false filings with the US Securities and Exchange Commission (SEC).

While the scale of the US$65 billion scam was eye-catching, what was perhaps more surprising was that he had managed to run the Ponzi scheme for decades without getting caught. In the wake of the high-profile case, forensic investigators have been left asking themselves whether there were any clues that could have alerted them to the scam earlier.

There is evidence that ordinary organisations are also falling victim to fraud. A recent report by the Association of Certified Fraud Examiners says that fraud accounts for US$6.3 billion in losses globally, with the typical firm losing up to 5 per cent of its revenues to the scourge annually.