The economy is surging, premier stock indices tease life time peaks too often and company targets and employee aspirations are surging to hitherto unforeseen levels.
MUMBAI: Good omen: The economy is surging, premier stock indices tease life time peaks too often and company targets and employee aspirations are surging to hitherto unforeseen levels. Fair enough, but an offshoot of this fairytale scenario is the lurking danger of corporate frauds, which are getting alarmingly innovative. Doesn’t it sound Enronesque? Like it or not, it is.
“Each case is a learning process for us. Frauds are increasing across sectors and are becoming more sophisticated,” Sumit Makhija, associate director, PriceWaterhouse Coopers, told DNA Money.
It is not large corporations alone that are confronted by this menace. “Even mid-sized companies are approaching us with complaints on frauds perpetrated on them,” says Makhija.
Perhaps filters are not in place as the companies turn on the spotlight towards bulging coffers, often ignoring elementary checks and balances.
“Companies are paying more attention to growth and not on the control systems,” Makhija said on the sidelines of the seminar ‘Combating corporate fraud,’ organised by PWC.
Frauds occur as companies set high targets, on cash flow shortages and due to excessive focus on growth, he explains. The controls are missing thus putting them at risk of mega frauds that can tear apart trail-blazing growth figures to oblivion.
So be it asset misappropriation, financial statement fraud or bribery, the buck starts at the over ambitious growth yearning of the companies. This overemphasis on growth by the companies has exposed them to a breeding ground for frauds, which may start from granting a dubious sick leave filing, to simple favours for a particular person for gains.
The manipulation of share prices like in the case of the IPO scams brings undue benefits to the organisation. In some cases, a third party is used to create slush money, which can be used for executing bribes in future.
As frauds become more sophisticated and are honed with technology advancement in all sectors, it is not all lost, say the experts. “It’s all about keeping your control systems in the right condition.”
Hence, next time when you celebrate those good sales numbers or plans, just scrutinise the health of your organisation and control systems, first.
Technology misuse can perpetrate frauds. But it can also catch the culprit. “Perpetrators think that they have deleted mails, but they lie in a different form and we have the technology to track them down, which the perpetrators believe have been deleted,” said Rajarshri Sengupta of PriceWaterhouse Coopers.
According to PwC’s biennial ‘Global Economic Crime Survey’ report of 2005, though 54% of the respondent organisations from India have reported to be victims of economic crimes, only 18% of the respondents consider it likely to come across fraud in the near future. The report says nearly 1/3rd of the cases were detected by chance. PwC’s next report is scheduled to be out by October this year. Counterfeiting, bribery and misappropriation of assets are the usual forms of economic crimes in the country.
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