Recent economic indicators have revealed that corporate fraud is on the rise in India, forcing more companies to engage the services of forensic auditors and white collar crimes investigators. Financial experts report that not only is forensic accounting becoming more prevalent, but the methodology is rapidly changing. Estimates indicate that forensic auditing services are doing business to the tune of INR 4-5 billion per year, which amount may double in three to four years.
The Rise Of Corporate Fraud
The value of forensic auditing practices is no surprise when you consider the increase of corporate fraud incidents. Kroll, a global investigation and risk-consulting firm headquartered in New York City, conducted a survey with staggering results:
- During fiscal year 2013, 60% of companies worldwide were affected by corporate fraud;
- This amount represents a 1% increase from FY 2012;
- The dollar value of fraudulent activities rose from 67% to 71% during that same time period;
- Fraudulent crimes take many forms, though certain activities rose to the front:
- Theft of physical assets or information,
- Corruption and bribery,
- Internal financial conspiracies,
- Vendor schemes to defraud,
- Regulatory breach, and
- Conflict of interest at the management level.
In addition, the survey revealed that insider fraud is an enormous problem in India, as 89% of participants reported that the perpetrator was an employee or executive of the company.
Increased Demand For Forensic Audit Services
These astounding figures are the most significant reason that forensic auditors and white collar crimes investigators have undergone an intense evolution during the last 10-15 years, according to Rohit Mahajan, Senior Director of Deloitte Forensic in India. He pointed to recent trends in the field:
- Early investigations dealt mainly with books and paper records, while more current inquiries involve the gathering of intelligence data.
- Information technology and corporate analytics are increasingly utilized in forensic investigation efforts, whether market data or HR details.
- The financial sector sees the most incidents of fraud, a phenomenon also stressed by Sandeep Dhupia, KPMG Director of Forensic Services in India. Mr. Dhupia pointed to misuse of technology as a factor.
- Despite the presence of the Reserve Bank of India, an aggressive regulator, banks lost INR 87 billion from 2010 to 2013. The main culprits were loans obtained via fraudulent documents, including personal, corporate and housing.
Forensic Auditor Specialties Expanding
Additional market sectors are seeing fraudulent schemes, resulting in a broader scope of specialties for forensic auditors and white-collar crimes practices. While CPAs, MBAs and attorneys are still in demand, they’re no longer the primary sources. Financial researchers, engineers, journalists, and individuals with law enforcement backgrounds are now required. Fraud is more complex than ever, raising issues such as management conflict of interest, conduct violations and violations of regulatory rules – all of which require significant experience in their respective areas.
More corporate executives are realizing that fraudulent schemes are here to stay. As the Kroll survey stated: “Indian companies were aware they operated in a high-corruption environment… Companies need to avoid accepting that fraud is just a normal part of business.”
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Veriti Consulting LLC provides professional forensic accounting services across the United States. To speak with a professional forensic accountant call 855.232.4410 or contact us via email.
Related Financial Fraud Articles:
- Three Most Common Fraud Schemes To Watch Out For
- The Ultimate Financial Fraud Examination & Prevention Checklist
- What You Need To Know About The Fraud Investigation Process and Procedures