The Ernst & Young annual fraud and corruption study: Results for Romania and Eastern Europe

Publish date: 18-06-2013
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Market conditions don't seem to improve

Based on recent international survey covering 36 countries, including Romania, indicates that , Romanian respondents are more optimistic about the local market, as 40% indicated that they expect market conditions for their business will improve over the next 12 months, as compared to only 27% of respondents across Eastern Europe and 32% respondents from all countries.

However, a considerable number of businesses in EMEIA are under increased pressure to meet the targets of their investors and owners, and deliver improved financial performance. Many businesses are also facing pressure to cut costs, which are reflected into the employees and managers of the companies as downward pressure on their remuneration, as 79% Romanian respondents indicated that they were aware of pay freezes, reduction of bonuses, pay cuts and removal of bonuses during last year in comparison to 59% of all participants.

Although Romanian respondents claim to have an optimistic view regarding the improvement of market conditions, this is contradicted by their expectations that financial targets will become increasingly harder to achieve, and that additional pressure will be placed on salaries, which suggests that their perspective is actually pessimistic.

Kenan Burcin Atakan, Ernst & Young Romania Fraud Investigation & Dispute Services Leader says: "Employees in Romania appear to be displaying an increased pressure to deliver good financial performance and acknowledge the threat of over their remuneration. Internal pressures should be supported and managed by strong internal anti fraud culture and governance of the compliance matters.” 

Organizations don't know what goes on inside them

The results of the survey suggest that managers or business owners do not inquire the operations of their companies sufficiently. It is reported that 82% of the Romanian respondents declared they were not asked for detailed information regarding the contracts established with third parties, suppliers or clients, or their respective identities. Similarly, 85% of Romanian respondents believe that insufficient inquiries were made regarding the value of marketing expenses, business development expenses and entertainment expenses. Accordingly, it is reasonable to infer that the company's relationship with third parties and/or the correctness of the reported financial performance is/are subject to certain risks. 

The results of the survey including Romanian respondents further suggest that, although the majority of respondents acknowledge the importance of anti-corruption policies in their organizations, the monitoring of these policies is below par.

Moreover, the survey reports that one in four Romanian respondents believe that abiding strictly by anti-corruption policies is detrimental to their competitiveness in the local market.

Kenan Burcin Atakan suggests: "Policies which appear to be weak or incoherent in terms of fraud prevention and detection propagate an image of the company's vulnerability to its employees. Once this vulnerability is acknowledged, the effective and efficient implementation of an anti-corruption program becomes a major challenge for the organization and in fact it is a crucial component of business sustainability"

Bribery and corruption are lower in Romania than in the rest of Eastern Europe

The survey results also show that the majority of the Romanian respondents appear to be in denial about how close bribery and corruption are to home. In this respect, 61% of Romanian respondents believe that bribery and corrupt practices are widespread in business in Romania, nevertheless only 17% believe that local companies overstate their financial statements, and only 1% of the Romanian respondents admit that their company engages in misreporting its financial statement, such as over-stating revenues or under-reporting costs to meet short-term targets and budgets.

Furthermore, of the Romanian surveyed, 19% indicated that in their sector it is common practice to use bribery to win contracts, as compared to a 37% response rate in Eastern Europe results. This was also supported by the vast majority of Romanian respondents (59%) which reported that they did not consider the offering of personal gifts, cash payments or entertainment to win or retain business, to be justified to help a business survive even in an economic downturn.

The survey results suggest that the majority of all respondents see bribery and corruption happening widely in their respective countries, but when asked about its occurrence in their sector, they hold a different view. 

Kenan Burcin Atakan suggests: "In reality, however, it is more likely to be that if bribery and corruption  is happening in each country, it is happening in all sectors, then, it may be well happening in your business. In order to mitigate the risks of fraud, bribery and corruption, management must acknowledge that their company, and not just the local market, is susceptible to such risks. Accepting that these risks exist is the first step to creating and implementing an effective program of fraud deterrence.”

Local fraud prevention programs are considered to be ineffective

The survey shows that the majority of organizations have established an anti-bribery/anti-corruption (ABAC) policy, and their employees believe that there are clear penalties implemented for breaching this policy. From Romania while the majority of Romanian respondents consider ABAC policies to be highly relevant to their work, only one in four believes that these policies are good in principle but do not work. 

The effectiveness of Compliance programs in Romania is considered to be partially impeded by a perceived lack of flexibility, as only 13% of respondents considered their company's ABAC policy to be flexible to local needs. The problem is further exacerbated by a lack of confidence in fraud reporting and whistle-blowing frameworks. Less than half of the employees surveyed believe that their company would support people who reported cases of suspected fraud, bribery or corruption, and only 36% indicated that reporting such instances is facilitated by a whistle-blowing hotline. 

Kenan Burcin Atakan concludes, "Although companies have been under significant pressure to cut costs, a proactive approach to fraud deterrence is more effective and less costly than a after-the-fact investigations. Once defined, anti-bribery programs must be properly implemented through constant communication, training and monitoring, as well as a strong message of support disseminated from the top of the organization.”

About the survey

Between November and December 2012, our researchers - the global market research agency Ipsos - conducted 3,459 interviews by telephone, online or in person with employees of large companies across 36 countries in Europe, the Middle East, India and Africa to gauge their views on fraud, bribery and corruption.  Eastern Europe results are based on 1,256 interviews across 12 countries, of which 100 interviews were conducted in Romania. 

About Ernst & Young

Ernst & Young is one of the world's leading professional services firms with approximately 152,000 employees in 700 offices across 140 countries, and revenues of approximately $22.9 billion in 2011. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, Ernst & Young has been a leader on the professional services market since its set up in 1992. Our 450 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. For more information, please visit

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