x Abu Dhabi, UAEThursday 27 July 2017

Satyam fraud is wake-up call to companies

Q&a with Rohit Mahajan, the executive director of KPMG's forensic services.

In our 2008 fraud survey, most companies stated that they detected fraud by accident. But this year's survey revealed that 47 per cent detected it through internal audits and 26 per cent through whistle-blowing mechanisms. Fraud has always existed, but now there is more awareness about it, companies are placing more controls for identification of fraud, and they are more open to talking about it. In fact, with the buoyancy in the economy, the risks of fraud have gone up.

These functions extend from sourcing of raw material to distribution of finished goods to the final customer. They are touching points with third parties - like vendors, distributors etc. The possibility of fraud goes up in such transactions because there is a higher risk of collusion.

The Satyam scandal shockingly demonstrated how the very existence of a company can be at risk because of fraud. It changed the widely held perception that fraud could only cause monetary damage. So it generated a lot of awareness; companies began talking about fraud more openly.

In our survey, 81 per cent of respondents said that they investigated fraud internally, 68 per cent of the respondents said that they initiated disciplinary action against the fraudsters. Only 35 per cent said that they take legal action against the accused. That is a very low figure, which demonstrates the reluctance of most companies to get involved in legal hassles. The government needs to make the entire legal process with respect to prosecution more efficient with respect to speedy closures. business@thenational.ae