Corporate Fraud in India is Rising

45% of the 1,000 respondents from leading Indian businesses declared that fraud had increased within their organization

Corporate fraud, particularly involving financial statements, is on the rise in India and internal controls are failing to prevent such abuses, global consultancy KPMG said on April 7.

Forty-five percent of the 1,000 respondents from leading Indian businesses declared that fraud had increased within their organization, said the study, conducted every two years.

KPMG said 81% of respondents reported that fraud involving financial statements was "a major issue."

"In an atmosphere of doubt and disbelief financial statements are often viewed with skepticism (in India)," the report said.

Corporate fraud has become an increasingly topical issue in India since leading outsourcer Satyam Computer stunned the nation's financial world in 2009 with the admission that its profits had been overstated for years. Satyam founder and former B. Ramalinga Raju declared he had inflated profits and jacked up the company's balance sheet by more than one billion dollars in what was India's biggest accounting fraud.

"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 most vital underlying reasons for frauds being on the rise," the report said.

"Outsourcing, increase in the use of third parties and technology have combined to open up new avenues of frauds like e-crime and intellectual property theft," said the report.

Copyright Agence France-Presse, 2010

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