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Updated: April 6, 2010 19:22 IST

Corporate fraud in India on the rise: KPMG

PTI
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Former Satyam Chairman Ramalinga Raju being taken to court for a hearing in connection with the multi-billion dollar Satyam scam. File photo
PTI Former Satyam Chairman Ramalinga Raju being taken to court for a hearing in connection with the multi-billion dollar Satyam scam. File photo

Corporate fraud in India is on the rise, a fact corroborated by 75 per cent of the top executives surveyed by consultancy firm KPMG.

An increasing number of employees are indulging in fraudulent activities, mostly driven by financial stress and dissatisfaction with their company management, according to ‘KPMG Fraud Survey Report 2010’. Global consultancy KPMG conducts the survey every two years across all sectors.

The survey found that both junior and senior employees are perpetrators of frauds and the quantum of fraud in value terms is also on the rise.

Fraud losses of more than Rs. 10 lakh hit “87 per cent of survey respondents, against only 47 per cent in the last survey, according to KPMG.

The survey finds that the current control system is ineffective, calling for a firmer hand against fraud.

“Organisations need to realise the importance of putting effective internal control mechanisms in place, so as to manage risks. It has become imperative for companies to be vigilant, and not just act when fraudulent situations arise,” KPMG (India) Head-Forensic Deepankar Sanwalka said.

The survey noted that supply chain fraud (procurement, distribution and revenue leakage) is the area most prone to cases of fraud.

After the founder chairman of Satyam Computers (now Mahindra Satyam) admitted to cooking the books of accounts to the tune of Rs 8,000 crore, the survey noted that instances of financial statement frauds are on the rise.

An overwhelming 81 per cent of the respondents have said financial statement fraud is now a major issue for investors.

It said that as the earnings of some executives are linked to the financial performance of an entity, the employees at times resort to cooking up the books.

“Ineffective whistle—blowing systems, inadequate oversight of senior management activities by the audit committee and weak regulatory oversight mechanisms are the reasons for the increase in the number of frauds that one can see in the industry today,” the report said.

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