Fraud involving senior management is a serious problem for Hong Kong firms, say experts who put much of the blame on lax vetting of executives before they are hired.
Alvarez & Marsal, a United States professional services firm, is working on a number of investigations in Hong Kong and Singapore where senior managers have been writing cheques to themselves.
'If one person is able to control the whole process from suppliers' accounts to paying the cheques, you have problems,' said Asia managing director Neill Poole.
PricewaterhouseCoopers (PwC) partner Tony Parton agreed: 'The reason for senior management fraud is because they are the very people who are able to use their authority to circumvent the controls in place. Not enough Hong Kong firms carry out checks in employing middle to top management.'
In fraud cases reported by Hong Kong companies over the last two years, 29 per cent were committed by the companies' senior management and another 21 per cent by middle management, according to a survey by PwC and Martin Luther University of Germany.
The study polled 101 Hong Kong firms, including 96 listed companies, of which 22 per cent reported they were victims of fraud. The figure was lower than the global average of 45 per cent, although, as Mr Parton pointed out, much fraud probably goes unreported.
'Countries that take fraud seriously generally find more fraud,' said Mr Parton, citing the US where 52 per cent of the firms surveyed reported fraud. 'Hong Kong companies in the survey tended to have fewer anti-fraud controls and those controls that were in place were applied less frequently.'