The criminal economy generates up to SEK 150 billion per year, according to the Swedish Police Authority. Companies are used on an industrial scale for money laundering and tax crimes. In the middle of this stand the auditors – who are supposed to be part of society’s protection – and who are responsible for several hundred engagements at the same time. The Swedish Economic Crime Authority warns about how criminals use front men, shell companies, and fictitious invoices to exploit corporate structures. If auditors do not have time to review carefully, the system becomes toothless.

A new mapping by Roaring shows the risk associated with a very high number of audit engagements. When a single auditor can be responsible for several hundred companies, where the combined portfolios of the most active amount to nearly SEK 20 billion in turnover, questions are raised about the security of the system. A significant share of these engagements is also linked to companies with zero turnover. In the deeper analysis of the 30 most active auditors, 22% of all engagements have zero (0) turnover, where the auditor with the highest share has zero (0) turnover in as much as 40% of the portfolio. A deeper analysis shows risks linked to clear industry patterns and varying portfolios. If auditing is reduced to a stamp without actual control, one of the last barriers against organized crime also disappears.

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Summary

The criminal economy generates up to SEK 150 billion per year, according to the Swedish Police Authority. Auditors are a professional group that is engaged by criminals to launder money and in that way constitute key players in the criminal economy. The Swedish Economic Crime Authority believes that this type of economic crime is becoming increasingly extensive and complex, and criminals today also use companies as tools for crime on an almost industrial scale.

The auditor’s primary task is to review a company’s finances and administration to ensure that they follow laws and good practice, which builds trust and counteracts irregularities. According to international standards (such as ISA 315), the auditor must also acquire a sufficient understanding of the client’s industry and operations, which is crucial for an effective review. There is no limit to the number of engagements an auditor may have, but good auditing practice places demands on maintaining the quality of the review. Auditors possess expert knowledge and high credibility, which makes them potential “enablers” who can knowingly or unknowingly assist criminal networks by legitimizing companies and facilitating economic crime.

Roaring’s latest report examines patterns in auditor portfolios that may indicate such risks and the importance of careful review in order to protect society.

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Key insights:

• Large number of engagements: Several auditors handle an enormous number of engagements, where one single auditor reviews close to 600 companies. This raises questions about the quality of the work.
• Dominant but varying portfolios: The analysis of the 30 most active auditors shows that some handle portfolios with turnover in the billions (for example, nearly SEK 20 billion for one auditor’s portfolio), while others have somewhat fewer but larger clients (SEK 45 million on average per client).
• No turnover: A significant share of the engagements shows other risk factors. 22% have zero (0) turnover. Two auditors stand out with extremely high shares of zero-turnover companies, one with 40% of the entire portfolio.
• Main industry unknown commonly occurring industry: The most common category among the auditors’ engagements is “Main industry unknown,” which accounts for 12.5% of all engagements and has a median turnover of zero (0) SEK.
• Industry patterns and risk profiles: Some of the industries where auditors have a high share of engagements are classified as risk industries, for example the cash-intensive restaurant industry, haulage firms, and construction.
• Differences in turnover: The three industries with the highest median turnover (Haulage firms, Electrical installation firms, Ground and foundation works) are all above SEK 8.5 million, while law firms have a median turnover of SEK 701,000.

“That one auditor is responsible for several hundred companies at the same time raises questions. It is difficult to see how one can maintain sufficient quality in the review when the workload is so great. The audit report is not just a formality, it is an important tool for detecting irregularities, strengthening trust, and ultimately contributing to counteracting economic crime. If the review becomes a routine signature rather than a real control, then the system does not function as intended.”
– Pontus Holmberg, CPO at Roaring.

In a situation where corporate structures are systematically used to conceal criminal proceeds, this places demands on society’s control functions to work. When a single auditor can be responsible for hundreds of companies, where the companies’ combined turnover is also astonishingly high, questions are raised about the security of the system. This analysis shows that this risk is not hypothetical, but concrete. It is manifested in a concentration in industries that are often linked to economic crime, such as the cash-intensive restaurant industry, as well as in a remarkably large number of companies with undefined operations and zero turnover. If auditing is reduced to a stamp without actual control, one of the last barriers against organized crime disappears. We must ask ourselves how many engagements are actually reasonable in order to maintain quality and security.

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Download the full report here >>

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For more information, please contact:
Sandra Siljestedt
sandra@roaring.io
+46 707 – 42 42 98

About Roaring:
Since 2016, Roaring has helped organizations reduce business risks and counteract economic crime by providing reliable company and personal data. The company offers integrations and ready-made applications that enable more efficient and automated verification and monitoring of information. The focus is on eliminating manual, slow, and complicated processes, which frees up time, ensures regulatory compliance, counteracts welfare crime, and reduces credit losses.

Roaring is one of the fastest-growing technology companies in Europe according to Deloitte.

Roaring’s headquarters are located in Danderyd, Stockholm.
For more information, visit www.roaring.io or contact Roaring at 08-819 820.

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