Survey says fraud rising, especially in public sector

Cos optimistic the Companies Act 2013 will improve governance standards

Indian companies, despite observing an increase in wilful defaults and fraud, are optimistic the Companies Act, 2013, would improve governance standards, shows a Grant Thornton India survey.

About 40 per cent of respondents felt fraud had gone up in India, while 67 per cent said the new Act would improve governance. The survey, which polled 500 executives, found public sector companies had seen a rise in fraud due to weaknesses in internal controls, scarcity of resources and senior manager overrides.

About 41 per cent of those polled by the auditor considered corruption, money laundering and bribing the biggest challenge faced by Indian companies, while 24 per cent said financial fraud and window-dressing were a challenge. Only a small percentage of respondents felt concerned about the risks of tax evasion (17 per cent), embezzlement or information theft (nine per cent for each).

The sectors most respondents said were prone to fraud are real estate and infrastructure, followed by financial services and telecom.

A majority of those polled (around 60 per cent) said building strong internal controls was the most effective strategy to beat fraud; 66 per cent of businesses take compliance personnel on their boards as a strategy. Indian businesses also rely on audits for compliance.

The recent notification of the Companies Act, 2013, was seen as a positive development by 67 per cent of respondents; 58 per cent considered putting a whistle-blower policy in place as a good way to stay alert against fraud.