Fraud is nothing new ? the Old Bailey, the Central Criminal Court in England, has records going back to the 1750s of cases where sailors were charged with sinking their own ships.
What should a company do to have a record of the checks and balances? Experts believe a healthy level of skepticism is the need of the hour. Deepanker Sanwalka, Partner, KPMG who is the national head of the forensic practice comments, ?Every company must have a robust control and process, which is reassessed time to time.? In other words, he adds, ?there is no other substitute for a healthy skepticism.?
Corroborating the possible solutions towards evaluating fraud, B Sai Chandravadhan, VP, Chess Management Services makes it a point that every company has several processes and systems and if these are followed on a regular and honest basis, there is a good chance that the company stays clean. ?Internally, at least bi-monthly, failing which, quarterly audits must be carried out. Several companies have monthly audits on production, quality, HR practices etc.? These must also be ?substantiated by external audits and regular management reports, which should be made available to auditors?, he adds.
Several laws, including around 35 financial and 25 corporate laws, are already present to ensure the avoidance of fraud, affirms Chandravadhan. It is the responsibility of the management and independent directors and external audit firms to ensure that these laws are complied with. The external auditors must have stringent checks to ensure that the company does not indulge in fraud.
Sanwalka explains various kinds of accounting frauds ? that in general the companies have been indulging in ? are related to revenue aspects such as inflation, understatement of liabilities, showing a 6th access of financials etc. Also, for instance, companies show a position of lower profit in order to have lower tax. It is also extremely important to introduce methods and mechanisms through which the ?legislative measures, both existing and prospective, can be properly implemented and executed,? believe consultants. Commenting on the future of corporate frauds, Sanwalka sums up ?part of the fraud will be there as there is a section that tends to do wrong things in spite of knowing the consequences. The lesson is to remain resilient and fight back.?