Mumbai: The overall incidence of fraud is rising in corporate India in the last two years and there is a need for Indian firms to deal with fraud risks firmly, according to the KPMG Fraud Survey Report 2010. The report also states that the financial services and consumer markets industry segments specifically, see a higher level of fraudulent activities within their industry, reports PTI.
"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," KPMG Forensic Head, Deepankar Sanwalka, said. The survey indicates 'procurement' and 'sales and distribution' as the most vulnerable areas across industries susceptible to fraud risk.
Financial statement fraud emerges as a major issue for investors. An overwhelming 81 percent of the respondents of the survey perceive financial statement fraud as a major issue in India. "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," he said.
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, the report said.
"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," KPMG Forensic Executive Director, Rohit Mahajan, said.
Bribery and corruption have come to be viewed as an inevitable aspect of doing business in India by many Indian companies, the report said. Almost 38 percent of the respondents believe that bribery is an integral feature of industry practises and is most rampant in seeking routine regulatory approvals and to win new business from prospective clients, it revealed.
According to 53 percent of the respondent companies, e-commerce and computer-related fraud will be a source of major concern in the coming years with supply-chain fraud, a close second followed by bribery and corruption and intellectual property fraud, the report said.
However, whatever be the type of fraud, 75 percent 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, it said.