- 75 percent of survey respondents state that fraud in corporate India is on the rise
- Stakeholders view financial statement frauds as a major concern
- E-commerce & Computer-related fraud to be a source of major concern in the coming years
- Procurement and Sales & Distribution are the most vulnerable areas identified
The perception of an increase in fraudulent activities in India within private business establishments and public institutions in the last two years, does not appear to be unfounded, the KPMG Fraud Survey Report 2010 confirmed this today. An overwhelming majority of the respondents (75%) indicated that the overall incidence of fraud is rising thereby indicating that India Inc needs to deal with fraud risks firmly. Survey responses specifically from the financial services and consumer markets industry segments feel a higher level of fraudulent activities within their industry. The survey also indicates “procurement” and “sales and distribution” to be the most vulnerable areas across industries susceptible to fraud risk.
Speaking on the report release, Deepankar Sanwalka, Head – Forensic, KPMG in India said, “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. With this report we hope to change the mentality of corporations today and make them wary of the concerns that are prevalent.”
Rohit Mahajan, Executive Director – Forensic, KPMG in India said, “Fraud incidents are on the rise in almost every industry across the country. 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.”
Among other notable findings of the survey, financial statement fraud emerges as a major issue for investors. In fact, an overwhelming 81% of them perceive financial statement fraud as a major issue in India. 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 that one can see in the industry today.
An extremely alarming conclusion that has emerged from the report is the fact that Bribery and Corruption has come to be viewed as an inevitable aspect of doing business in India by many Indian companies. 38% of the respondents believe that bribery is an integral feature of industry practices and are most rampant in seeking routine regulatory approvals and to win new business from prospective clients.
The threat of fraud remains problematic, no matter the size of the company. The value, type and frequency of fraud vary based on various factors such as the effectiveness of internal controls, the degree to which responsibilities are devolved and complexity of automated systems and processes. 53% of the respondent companies believe that e-commerce & computer-related fraud will be a source of major concern in the coming years, with supply chain fraud a close second followed by bribery & corruption and intellectual property fraud. However, whatever be the type of fraud, 75% of the respondents indicate that, except intellectual property (IP) fraud, fraudulent activities were perpetrated by employees, reaffirming that the enemy within poses the highest risk. Internal parties (management and non management employees) tend to have a higher propensity to commit fraudulent activities than external parties (customer, vendor or business associate).
The survey comprises of respondents across the industry and at different levels in the organizations. Approximately 50% of the respondents were Chairman/ Managing Directors and CFOs / Head of Finance of firms.
About KPMG
KPMG is the global network of professional services firms of KPMG International. KPMG member firms provide audit, tax and advisory services through industry focused, talented professionals, who deliver value for the benefit of their clients and communities.
KPMG in India has offices in Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Kolkata and Pune and services over 5,000 international and national clients. The firms in India have access to more than 4000 Indian and expatriate professionals.
For a copy of the report log on to: www.in.kpmg.com
