Corporate fraud in India rose 45% last 2 years: Study

Corporate frauds rose by over 45 per cent in India in the last two years and the lurking risk has been dissuading global companies from investing in India, said a study.
Corporate frauds arose out of corruption, money laundering, tax evasion, window dressing, financial reporting fraud and bribery due to weaknesses in internal controls, scarcity of resources and over-riding powers of senior management, it added.
The study by Assocham and Grant Thornton said companies related to real estate and infrastructure sector (52%) are considered to be the most vulnerable to fraud-related incidents, followed by financial services (34%), telecom (5%), manufacturing (3%), electronics and IT/ ITeS (2%), Hospitality and tourism (2%).

Over 65 per cent of the survey respondents agreed that there is a rising trend of wilful defaults and frauds.
Procurement frauds, payrolls frauds, asset misappropriation, financial misstatement, corruption, bribery, tax evasion, piracy, intellectual Property (IP) fraud, kickbacks, accounting frauds, counterfeiting, white-collar crimes etc are swiftly threatening business in both the private and public sectors, it added.
"Corporate wrongdoing inevitably ends up creating a vicious cycle that hurts shareholders value, damages investor's trust, leads to locking-up of capital in litigation, and ultimately causes wider financial market instability; eventually becoming part of much larger problems," Assocham Secretary General D S Rawat said.

Over 66 per cent of the respondents highlighted their concerns about the impact of frauds on their brand and market reputation. Moreover, 26 per cent were concerned about the financial losses that businesses suffer as a result of frauds.

Intentional fraudulent financial reporting, information manipulation, theft of inventory etc are among the common types of misconducts that can result in financial losses for companies, adds the joint report.
Around 71 per cent of survey respondents believed that incidents of fraud would continue to rise over the next five years, and highlighted bribery and corruption, and regulatory noncompliance as the top frauds they had experienced in the past two years, highlighted the paper.

A majority of the respondents (69%) consider strong internal controls as the most effective mitigation strategy for managing operational and financial risks related to frauds.