New Delhi: A rise in financial frauds over the past few years has emerged as one of the sour points for foreign investors in India, said an Assocham-Grant Thornton paper.
The paper said that if it is not checked by a global standard regulatory framework coupled with strong internal corporate prevention mechanism, the menace could take disastrous proportions.
“With the increased prevalence of fraud and the negative consequences associated with it, there is a strong argument that companies should invest resources and time to tackle it. The cases of financial fraud have risen in India over the last few years and have become one of the main factors deterring foreign companies from investing in India. As the economy is growing, increasing corporate frauds will prove to be disastrous for India,” said the paper. It said while entering India would be a critical component of growth for many international organisations, understanding the risks in India is also critical for the survival of business operations. Listing several challenges on the issue, the joint ASSOCHAM-Grant Thornton paper expressed concern over the fact that “financial managers and accountants at organisations who understand the limitations of an audit and standard auditing procedures are deliberately trying to deceive external auditors and investors by cooking the books.”
Noting inability to perform an effective fraud risk assessment, the paper said technology is a double-edged sword. “As technology is advancing, fraudsters are able to find ways to use it and perpetrate a fraud. Tech-savvy fraudsters are using technology in a variety of ways to commit frauds. Some include creation of false or misleading information accounting records,” said Assocham.
“Putting restrictions on what your employees have access to will limit the potential of misappropriation of assets but if an employee has access to all aspects of an organisation, the potential for fraud is significantly increased,” it said.
Assocham president Mr Sunil Kanoria said devious ingenuity of the human brain is now leveraging technology to indulge in more sophisticated methods of crimes which are very much capable of creating systemic instability.
