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Corporate fraud incidents on the rise in India, says KPMG


Managing the risk of fraud is essentially no different to managing any other type of business risk !!

Almost 75 per cent of corporate India surveyed felt the overall incidence of fraud was rising, according to ‘India Fraud Survey Report 2010’ by KPMG.

The report also pointed out that e-commerce and computer-related frauds would be major concerns to companies in the coming years. The survey was conducted across 1,000 firms, both Indian business establishments and public institutions, with an annual turnover of Rs 500 crore to over Rs 10,000 crore.

Weak internal control systems, eroding ethical values and a reluctance on the part of the line managers to take decisive action against the perpetrators, are cited as the main reasons for fraud being on the rise.

SOME KEY FINDINGS
* 63% say the desire to exceed market expectations is the main reason to commit financial fraud
* 81% say financial statement fraud is a major issue
* 41% say they do not have a formal fraud risk management framework
* e-commerce & computer-related fraud to be a source of major concern in the coming years
* 75% all fraudulent activities, except Intellectual Property (IP) fraud were perpetrated by employees

Among the types of fraud, the survey noted that 81 per cent viewed financial statement fraud as a major issue. Ineffective whistle-blowing systems, inadequate oversight of senior management activities by the audit committee and weak regulatory oversight mechanisms are the reasons for the growing worries, as well as the increase in the number of frauds.

Respondents, particularly from the financial services and consumer market industries, feel there is a higher level of fraudulent activities within their industry. The survey also indicated “procurement” and “sales and distribution” to be the most vulnerable areas across industries susceptible to fraud risk.

Close to 63 per cent of the surveyed firms said the desire to meet or exceed market expectations was the most significant reason to commit financial statement fraud. “The need of the hour is for organisations to realise the importance of putting effective internal control mechanisms in place, so as to manage risks. Accountability is no longer restricted to a company as a whole, but also streams down to each and every individual. It has become imperative for companies to be vigilant and aware, and not just act when fraudulent situations arise,” said Deepankar Sanwalka, head – forensic, KPMG in India.

India Inc also realises the value of these frauds. The survey indicated that the quantum of frauds increased manifold over KPMG’s 2008 fraud survey. About 87 per cent respondents said their organisation incurred fraud losses of more than Rs 10 lakh as against 47 per cent in the last survey.

Rohit Mahajan, executive director – forensic, KPMG in India, said, “Being a fast paced economy such as ours, fraud management is an extremely vital issue confronting us today. Managing the risk of fraud is essentially no different to managing any other type of business risk. All that it requires is resilience to combat that fraud.”

However, the positive finding of the report was that there is a greater realisation to avoid fraud. Compared to the 2008 fraud survey, in which only 27 per cent of the respondent organisations had adopted proactive data analytics for analysing e-data, this year’s survey indicated that: while over 42 per cent have implemented proactive data analytics in various streams in the organisation, over 22 per cent have partially implemented it.

Courtesy: Business Standard.

SOME KEY FINDINGS
* 63% say the desire to exceed market expectations is the main reason to commit financial fraud
* 81% say financial statement fraud is a major issue
* 41% say they do not have a formal fraud risk management framework
* e-commerce & computer-related fraud to be a source of major concern in the coming years
* 75% all fraudulent activities, except Intellectual Property (IP) fraud were perpetrated by employees

US market regulator focuses on role of auditors in Satyam fraud


NEW DELHI: American capital market regulator the Securities and Exchange Commission has completed its probe in India into the multi-crore rupee Satyam fraud case, especially the role of auditors.

A team of the Commission came to India following filing of over a dozen class action lawsuits in the US against the promoters and managers of the IT firm on behalf of investors, who purchased American Depository Shares of the company between January 6, 2004 (the listing date in the US) and January 6, 2009 (the day before Raju’s letter).

Mahindra Satyam Ltd

Mahindra Satyam Ltd

TURNING INTO

                                                                                                                                                              Asatyam Story

Asatyam Story

In these lawsuits, Satyam Computer, its promoters and management were charged with duping thousands of American investors of billions of dollars by artificially inflating share prices.

The SEC team has conducted detailed discussions with the CBI specifically on the role of auditors in the multi-crore rupee scam.

During the discussions, the team of Commission looked into particular details about the way accounts were allegedly fudged in the tainted computer firm and also at the role accounting firms involved in the same.

Cyber Frauds – Indian companies vulnerable to internet attacks


PUNE: Here’s a cause of concern for India Inc. Independent findings of internet and data security company Symantec and research agency Frost and

Sullivan suggest that Indian companies are susceptible to internet threats and companies are underspending on security. The country ranked number one on the prevalence of internet virus attacks in the Asia Pacific and Japan region, according to data with Symantec.

How does one attackes a website
How does one attackes a website
Phishing Attacks & Cyber Frauds

Symantec revealed this in the findings of its IT security scenario in 2008, while Datacraft, a company providing software solutions for the manufacturing industry, had commissioned Frost and Sullivan to conduct a security compliance survey of manufacturing companies in the country.

Symantec’s findings show that India features among the top three countries in the region to be affected by malicious activity on the internet, aimed primarily at stealing sensitive corporate information.

Frost and Sullivan’s survey in 2009 found that 92% of the companies had security vulnerabilities and were underspending on information security .

While larger companies are taking steps for data security, small and medium businesses are not worried. Ken Schneider, Symantec CTO, security and compliance said, “While data theft is the prime reason for attacks, 61% of Indian SMBs are unaware of IT security threats and 68% do not consider data loss as a major security threat. Unprotected infrastructure, lack of IT policies, poorly protected information and poorly managed systems are a cause of concern for businesses. Unless enterprises improve security protocols and measures to counter malicious activities, India will continue to be a soft target of Internet threats.”

Beware of Phishing & Inernet Frauds
Beware of Phishing & Inernet Frauds

Added Tony Murphy, solutions head, manufacturing, Datacraft, “The next two years are critical as security threats will increase. Manufacturing companies are expanding their IT infrastructure, thus increasing the complexity of operations. However, they are not investing enough to meet challenges thrown up by this complexity . Most of them are also not compliant with the latest security standards .”

The Symantec survey revealed that incidence of spam is increasing and 12% of spam in the APJ region originates from India. Mumbai features high in the prevalence of internet attacks, contributing 37% of the affected computers, followed by Chennai at 24%.

Globally, spam tripled in 2008 compared to 2007.

According to a PricewaterhouseCoopers (PwC), a consultancy, report, IPR and business information contribute 32% and 68% respectively of data loss and Symantec’s findings reveal that 59% of the employees who lost or left a job walked away with some corporate information.

CYBER FRAUD

92% cos vulnerable

61% of Indian SMBs are unaware of threats and 68% do not consider it a threat

Mumbai contributes 37% of the affected computers

Chennai follows Mumbai at 24%

Globally, spam tripled in 2008

59% of the employees who lost or left a job, walked away with co data

http://www.theeconomictimes.com

19 Sep 2009, 1044 hrs IST, ET Bureau

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