Corporate Frauds Rising in India: KPMG Survey

As per the India Fraud Survey Report 2012 released by KPMG, around 75 percent surveyed corporate in India believed that the incidences of fraud were on rise. The report indicated that computer-related and e-commerce frauds were the major concerns especially in the coming few years. This survey was being conducted over 1000 firms which included public institutions as well as business establishments. All these surveyed organisations had an annual revenue ranging from 500 crore Rupees to more than 10000 crore Rupees.

The major reasons of these rising frauds were grinding down of the ethical values, weaker internal control system as well as reluctant managers for taking the decisive action. Among various kinds of frauds, it was pointed out by the survey that around 81 percent noticed fraud in the financial statement as a major concern and issue. The reason of these increasing numbers of frauds as well as growing worries were inadequate mistake of senior management tasks by the audit committees as well as weak regulatory mechanisms.

Respondents of the survey, especially from consumer market industries as well as financial services felt that there were more frauds in their industries. The most susceptible areas of fraud were sales and distribution as well as procurement.
The surveyed companies believed that the reason why there were increasing frauds in the financial statement was because of more competition as well as a quest to exceed the expectations of the market.
 
India Inc realised the value of the frauds. The survey also indicated that the number of frauds had risen from what they were in 2008. Around 87 percent respondent firms accepted that the organisations had suffered loss of over 10 lakh rupees. In the previous survey of KPMG, this percentage was 47 percent.

The positive aspect of this report however is that the companies realise that there is a need to curtail these frauds.
 
The key findings of this survey are as follows:

• 63 percent firms believed that the quest to surpass market expectations was the primary reason of committing financial fraud
• 81 percent believed that the fraud in financial statement was a primary concern
• 41 percent accepted that there was no recognised fraud risk management system
• Computer-related and e-commerce frauds would become major concerns, especially in coming years
• Around 75 percent frauds, leaving aside the Intellectual Property (IP) frauds were committed by the employees