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The accountant's view

CORRUPTION

'ENGINEERING and construction companies lose less than other industries - such as retail or financial services, ' comments Jonathan Hook, global engineering and construction leader at PricewaterhouseCoopers. 'Crime [in this sector] is usually at a low level, and the UK is less corrupt than many other countries.

But more sophisticated fraud is coming through, which companies should guard against.'

PricewaterhouseCoopers released its report on economic crime in the construction industry in July. The report found that over 43 per cent of engineering and construction companies had experienced economic crime over the past two years, but there was a degree of complacency: a much lower number - only 18 per cent - felt their organisation was likely to suffer from economic crime.

The PwC report found that asset misappropriation, such as the stealing of materials or substitution of inferior materials, was still the most common problem, with 57 per cent of respondents saying they had been victims. This was an improvement on PwC's previous survey, conducted in 2004, in which 66 per cent of respondents claimed to have been stung.

But while companies are tightening up on assets, Mr Hook argues that they need to get up to speed with other more sophisticated types of fraud, such as financial misrepresentation, whereby clients misrepresent their financial wealth or stability - or subcontractors misleading on the health of their accounts.

'We would recommend more investment in prevention and project peer reviews, coupled with a zero tolerance approach even to petty crime, ' comments Mr Hook.

'Industry has had a tacit acceptance that bits of it are corrupt. It has become a bit endemic.'

Key strategies for companies to adopt, says Mr Hook, would be putting in robust systems in place to track assets and control materials.

'A lot of this comes down to the quality of management at project and divisional level.

Understanding where cost can be hidden and challenging where things might be suspicious.

'At head off ice level it's a case of looking out for patterns of payment and unusual patterns generally.'

All decent-sized construction groups should have a whistleblowing policy, some route of reporting up the chain so that the information does not come back to the individual and cannot be used against him.

A lot of the more progressive companies are doing this.'