Fraud has become increasingly important in the eyes of regulators across the world. Tougher domestic and international regulations are spurring companies to improve their governance.
However, aggressive growth, globalisation, increased competitive and other pressures are factors which increase susceptibility to fraud. As Indian companies go global, they are at a higher risk of fraud as they face stringent regulations of the developed world. Given such a scenario, investigative and forensic services are a lot more relevant to India Inc today, says Ashwani Puri, Leader, Disputes Analysis and Investigations, PricewaterhouseCoopers - India, in an interview. Excerpts:
What are the global trends related to fraud and corruption?
Fraud is a significant and growing threat worldwide. Virtually no industry today is immune to it. As per PwC's latest Global Fraud Survey (2005), in the past two years, the average financial damage to companies from frauds is estimated at $1.7 million. As per this survey, 45% of the (respondent) companies worldwide have fallen victims to economic crime in the past two years - an 8% increase over our previous survey.
Our experience tells us that the larger the firm, the higher is the likelihood of fraud. Asset misappropriation, bribery and corruption are the most common type of frauds. Cyber crime and frauds pertaining to intellectual property rights (IPRs) are new kinds of frauds that are gaining menacing proportions.
Are there any substantive fraud statistics available in India?
From the various surveys, including the one conducted by PwC, one can glean the incidence and trends pertaining to frauds in India. 54% of the respondent organisations from India reported having been victims of economic crime over the past two years .Our survey shows that in India, corruption and counterfeiting are the two most rampant frauds in the country.
What are some of the effective methods of preventing, detecting and combating fraud?
We advise companies to proactively monitor risky areas within the organisation, to develop policies which encourage an open environment to report any unethical practice and protect whistle blowers within the company.PwC's proprietary methodology calls for a systematic evaluation of corporate governance, including the effect of the company culture on fraud, comprehensive fraud risk assessment and evaluation of transaction level controls, periodic examination of processes and controls through internal and external audits as well as prompt investigation and remedial actions upon discovery of fraud and irregularities.
How relevant are forensic services in India? In what circumstances are investigative and forensic specialists retained?
Globalisation resulting from cross-border deals and use of latest technology solutions are increasing complexities of doing business today and companies in India need to fight against fraud on a regular basis. Therefore, investigative and forensic services are highly relevant to India today.
In addition to rendering investigative services where a fraud is detected or suspected, we are assisting companies in regulatory investigations, resolution of commercial disputes, cyber crimes, etc. We are also performing forensic reviews in cases where Indian companies looking out for acquisitions overseas as regular due-diligence exercise does not necessarily cover the fraud risk adequately.
Are regulators in India doing enough to combat frauds? Are enforcement measures improving?
Regulators in India are increasingly identifying possible fraud risks and becoming pro-active in their actions. For instance, the Competition Commission has been constituted to review anti-trust and monopolistic risk prior to large mergers and acquisitions as well as during operations. RBI has also stepped up enforcement of anti-money laundering regulations.
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Last update : 15-06-2007 07:59
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