Johannesburg — NEARLY two in three companies in SA reported falling victim to economic crime during the past 12 months, according to a new report released yesterday by PricewaterhouseCoopers .

"The global economic downturn has heightened the pressures and incentives to commit fraud," said Louis Strydom, head of PwC's forensics practice in SA. "Economic crime is pervasive, persistent and pernicious. No organisation and no industry is immune from the threat of fraud," he said.

"In these tough times, the temptation to inflate results or take part in other forms of financial statement fraud may overcome ethical values .

"In an economic downturn, financial targets are more difficult to achieve, individuals may feel pressured, and their personal financial position may be threatened by reductions in pay or layoffs."

The study of more than 3000 companies in 54 countries was carried out by PwC with INSEAD business school in July and August.

The study found that 62% of companies had experienced some form of economic crime during the period. Globally, financial statement fraud was found to be the fastest-growing form of economic crime and had more than tripled since 2003. However, in SA it had decreased from 45% in 2005, to 39%.

Strydom said one of the reasons could be the focus of the auditing profession on accounting fraud and its outcome .

Strydom said it was not surprising that the most significant category of economic crime continued to be asset misappropriation (82%). It was usually the easiest to detect since it involved theft of items with a clear value, Strydom said.

Other economic crimes reported by companies included bribery and corruption (59%), financial statement fraud (39%), money laundering (10%) and tax fraud (3%).

The study found evidence that the economic downturn had helped to drive the incidence of fraud. The majority of companies (78%) said their companies faced greater risk of economic crime in the downturn.

Of those companies that identified underlying business pressures or incentives as the main reason for the rising incidence of fraud, 54% said difficulty in achieving business targets was a motivating factor for fraud during the recession.

Countries reporting high levels of economic crime included SA (62%), Russia (71%), Canada (56%) and Kenya (57%).

SA's high rate could be attributed to the country finally uncovering and detecting white- collar crime and companies reporting matters to the authorities, said Strydom.

Despite the high levels of fraud reported, it could not be discounted that further incidents had gone undetected .

For instance, there had been a reduction in the number of staff members deployed on internal controls as a result of the economic downturn.

In 2007, 20% of companies in SA reported that internal audit was the means by which economic crime was detected.

This year, only 5% referred to internal audit. Strydom said this could be attributed to "increasing pressure being placed on internal audit and the downsizing of teams".

The study also found that the profile of the internal fraudster was changing.

Crimes committed by middle managers rose, accounting for 29% of all internal frauds, up from 22 % in 2007.