Fraud in the Mining Industry

Unscrupulous Companies Have Many Fraud Options

By Diaz Priantara, CFE, CPA


Fraud Spotlight 


 Judy, a CFE, was an internal auditor for QRW Mining Company, which had copper, iron and nickel mines around the world. She had her eyes on a mine that QRW had closed two years earlier. The company had told the federal government that it had reserved a large amount to cover reclamation and revegetation costs. However, she compared the actual amount against the company’s promise, and the numbers did not match. And when she visited the site, she discovered that QRW had not filled in the strip-mine site, which had become an overflowing pond. 


Though this case is fictitious, it is indicative of mining frauds worldwide. The economics of the global mining industry can be unpredictable. Mining prices often are not stable, and the global economic crisis has affected the industry adversely: the demand of mining products is dependent on customers’ buying power and consumption. Some mining companies and their employees can be driven to fraud. However, auditors and fraud examiners working for mining companies can deter fraud through savvy preparation and detailed organization.


Fraud in the mining industry can be divided into four types: environmental, forestry, occupational and reserves or resources reporting. (Mining-safety fraud, a possible contributing factor to many recent mining disasters, is an important, but separate category, that probably requires a column of its own.)

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