In the post Sarbanes-Oxley era of corporate governance awareness, companies everywhere are beefing up their internal controls.

Trouble is it's not doing anything to make them less vulnerable to fraud, according to the latest Ernst & Young Global Fraud Survey.

The study identified a serious disconnect between what they expected their controls could achieve and what they had in place.

Somehow, the internal controls are not translating sufficiently into sure-fire mechanisms that will stop fraud.

According to the survey, 90 per cent of respondents believed their controls were sufficient to identify and investigate fraud. But nearly half (40 per cent) were without a formal or documented anti-fraud policy and most organisations admitted they didn't communicate their anti-fraud stance to agents, intermediaries and joint venture partners.

Similarly, 60 per cent believed their operations were at greater risk to fraud in emerging markets, with one in five saying they had not invested in emerging markets because of fraud risk. And yet 75 per cent had experienced a fraud in their developed market while 32 per cent had experienced a fraud in the emerging market.

Alarmingly, the report says that the shift towards international accounting standards might exacerbate the risk of fraud.