Financial fraud hit 87% of Indian companies in past two years

With white-collar crime almost doubling from last year, financial fraud by insiders remains the single greatest fear of Indian companies, ac- cording to the results of a survey by audit and consulting firm KPMG. The results were released on Tuesday.
Of the 1,000 companies covered in the survey, 87% said they had incurred losses of at least Rs10 lakh due to fraud in 2009.
The previous survey, carried out in 2008, had only 47% complaining on this count. At least 75% of Indian firms said in- stances of fraud had increased over the past two years.
A lack of objective and independent internal audits, inadequate oversight of senior management's activities by the audit committee, and weak regulatory environment were pinpointed as culprits for the spike in financial statement frauds.
The 10th biennial India Fraud Survey Report 2010 reveals that 81% of the companies surveyed feel that financial statement fraud is the biggest threat in India, with at least 60% of them saying inadequate enforcement of regulations has increased such fraud.
The findings of the report suggest that weak internal control systems, eroding ethical values and lack of legal action against fraudsters create an environment conducive to such crimes.
Indian companies, according to the study, remain highly vulnerable to fraud in the absence of “inadequate internal control framework“ that can identify and deal with such crimes. The report suggests that 41% of Indian firms do not have fraud risk management systems.
45% of the firms have experienced fraudulent activities in the past two years, with financial services and consumer markets showing the highest levels of risk.
Satyam Computer Services Ltd, in which founder and chairman B. Ramalinga Raju admitted to showing non- existent income over the years of Rs7,136 crore, the trend in fraud detection has changed.
“Companies are more open to discuss and take action against fraudsters.
According to the World Bank, bribes paid annually amount to more than $1 trillion (Rs44.5 trillion) globally.
India scores poorly on corruption and bribe payments in the list of organizations such as Transparency International, which ranks countries based on corruption and propensity to demand bribes.
India's corruption perception index score in 2009 was 3.4 on a scale of 0-10, with 10 being the least corrupt. In 2008, it was one of the bottom four on the global bribe payers index, with a score of 6.8.