Almost 75 per cent of corporate India surveyed felt the overall incidence of fraud was rising, according to India Fraud Survey Report 2010 by KPMG.
The report also pointed out that e-commerce and computer-related frauds would be major concerns to companies in the coming years. The survey was conducted across 1,000 firms, both Indian business establishments and public institutions, with an annual turnover of Rs 500 crore to over Rs 10,000 crore.
Weak internal control systems, eroding ethical values and a reluctance on the part of the line managers to take decisive action against the perpetrators, are cited as the main reasons for fraud being on the rise.
| SOME KEY FINDINGS |
| * 63% say the desire to exceed market expectations is the main reason to commit financial fraud |
| * 81% say financial statement fraud is a major issue |
| * 41% say they do not have a formal fraud risk management framework |
| * e-commerce & computer-related fraud to be a source of major concern in the coming years |
| * 75% all fraudulent activities, except Intellectual Property (IP) fraud were perpetrated by employees |
Among the types of fraud, the survey noted that 81 per cent viewed financial statement fraud as a major issue. Ineffective whistle-blowing systems, inadequate oversight of senior management activities by the audit committee and weak regulatory oversight mechanisms are the reasons for the growing worries, as well as the increase in the number of frauds.
Respondents, particularly from the financial services and consumer market industries, feel there is a higher level of fraudulent activities within their industry. The survey also indicated procurement and sales and distribution to be the most vulnerable areas across industries susceptible to fraud risk.
Close to 63 per cent of the surveyed firms said the desire to meet or exceed market expectations was the most significant reason to commit financial statement fraud. The need of the hour is for organisations to realise the importance of putting effective internal control mechanisms in place, so as to manage risks. Accountability is no longer restricted to a company as a whole, but also streams down to each and every individual. It has become imperative for companies to be vigilant and aware, and not just act when fraudulent situations arise, said Deepankar Sanwalka, head — forensic, KPMG in India.
India Inc also realises the value of these frauds. The survey indicated that the quantum of frauds increased manifold over KPMGs 2008 fraud survey. About 87 per cent respondents said their organisation incurred fraud losses of more than Rs 10 lakh as against 47 per cent in the last survey.
Rohit Mahajan, executive director — forensic, KPMG in India, said, Being a fast paced economy such as ours, fraud management is an extremely vital issue confronting us today. Managing the risk of fraud is essentially no different to managing any other type of business risk. All that it requires is resilience to combat that fraud.
However, the positive finding of the report was that there is a greater realisation to avoid fraud. Compared to the 2008 fraud survey, in which only 27 per cent of the respondent organisations had adopted proactive data analytics for analysing e-data, this years survey indicated that: while over 42 per cent have implemented proactive data analytics in various streams in the organisation, over 22 per cent have partially implemented it.
(07-Apr-10)
www.business-standard.com
The main and the broader issue involved is not the built-in corruption of the Indian polity, but the permissiveness of the society in showering praise on all who make moneu in zillions of crores and everybody knowing full well that there is only one way of making unending streams of unaccounted black money and buying off politicians and bureaucrats of all colours and ranks!
Is KPMG sure that it is itself NOT a party to one single such incident/instance? I am not trying to hold any brief for my countrymen, as this is their speciality. But are our guests of foreign origin also above board? And, what about the fudged accounts of PSUs showing bogus profits/continuing to lose year after year with no decrease in expenses on tours, air fares, guest houses, vehicles, etc., etc.?
Having done this why dont KPMG spell out what is the majaor root cause. What auditors were doing as watch dongs.