Companies

What triggers corporate fraud

Kurmanath KV Hyderabad | Updated on December 07, 2018 Published on December 07, 2018

A Deloitte survey assesses the contours of fraud, reasons for it and soft spots

Fraud in the corporate sector is often hushed up. Not many corporates seek law enforcement agencies, try to identify the problem areas and tackle the issues themselves. Research firm Deloitte has conducted a survey to get a sense of the size of the fraud, reasons and vulnerable areas or weak links.

That about half of the respondents indicated losing more than Rs 10 lakh in fraud losses in the recent past shows the gravity of the challenge. But in most cases the fraudsters are allowed to resign in lieu of filing a legal case. Only a third of the respondents suggested that they took legal action against the fraudster.

The survey captured 439 responses, with two-thirds of them having decision-making roles. The survey covered top executives in corporates in all major sectors. About 70 per cent of the respondents belonged to organisations with over Rs 250 crore turnover.

The third edition of the India Corporate Fraud Perception Survey (2018) has found three top reasons for fraud - lack of an efficient internal control or compliance system, diminishing ethical values, and senior management override of controls.

And, the top weak links or soft spots are identified as vendor, customer or business partner favouritism, inventory pilferage and diversion or theft of funds.

"Only 17 per cent of the respondents indicated that their organisation had experienced bribery and corruption in the recent past. This may be a result of better internal controls instituted to prevent bribery," the report points out.

Key actors

The survey found that junior and middle management employees were identified as being most likely to commit fraud. “There is greater sensitivity to the reputational damage that corporate fraud, misconduct and non-compliance can cause. Organisations are recognising that fraud is a result of internal systemic loopholes that can be plugged by stronger controls and limited overrides," Nikhil Bedi, Partner and Leader (Forensic, Financial Advisory Services) of Deloitte India, has said.

Technology help

The report said data mining tools, analytics and reports generated by the ERP system, besides traditional statistical analysis are helping in preventing internal fraud.

Social network analysis, sentiment analysis, data visualisation, interactive dashboards, machine learning, robotic process automation and artificial intelligence are also helping corporates keep tabs on pilferage.

Published on December 07, 2018

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.