| Ineffective control systems and diminishing ethical | | | | commit financial statement fraud. |
| values are contributing to a growing prevalence of | | | | "In a recessionary environment, cost reduction initiatives |
| fraud in India, according to a recent survey by | | | | increase the potential for internal control breakdown |
| professional service firm KPMG. | | | | and frauds, especially financial statement fraud," said |
| Titled "India Fraud Survey Report 2010," the | | | | Rohit Mahajan, executive director of KPMG's forensic |
| examination into corporate India found that 75 percent | | | | services, according to Reuters. "Therefore, with signs |
| of those questioned believe that fraud cases had | | | | of economic recovery, it is imperative for companies |
| increased over the last two years. The report | | | | to reevaluate their cost reduction initiatives." |
| attributes this perception to the existence of mistrust | | | | An astounding 87 percent of individuals surveyed have |
| within companies, individuals striving to achieve | | | | said that their firms have lost more than Rs.1 million to |
| personal gains, pressure to meet earnings targets, and | | | | fraud, up from 47 percent in the company's 2008 |
| lack of control mechanisms. | | | | survey. The perception of the Indian business |
| The survey's respondents were made up of chairman | | | | environment, where 38 percent believe bribery is an |
| managing directors, chief financial officers, heads of | | | | integral part of company transactions, is also cause for |
| internal audit and compliance, fraud risk managers, and | | | | concern. |
| other senior personnel at close to 1,000 leading | | | | "We treat bribery as an acceptable practice, an |
| organizations operating in a wide range of industries | | | | integral feature of doing business," said Mahajan. "But |
| throughout India. | | | | as Indian companies become more global and more |
| Among these industry leaders, a discouraging 81 | | | | global firms do business in India, that perception will |
| percent believe that financial statement fraud is a | | | | change. There will be a bigger push for a |
| major issue facing the country. Regarding the motive, | | | | zero-tolerance attitude to bribery and corruption and |
| 63 percent indicate a desire to meet or exceed | | | | greater disciplinary action for perpetrators." |
| market expectations as a leading cause, while 61 | | | | While corruption and bribery will likely linger in emerging |
| percent feel performance-based remuneration it the | | | | Asia for a while to come, the region may see |
| underlying instigator. An absence of appropriate | | | | improvements in this area alongside its growing role |
| repercussions could also be a driver, as indicated by | | | | within the global economy. In the meantime, a little more |
| the 62 percent of respondents who believe strict | | | | transparency and accountability among India's industry |
| disciplinary actions are not enforced for those who | | | | leaders wouldn't hurt. |