Last year, our hiring was up by more than 20%, said Rohit Mahajan, partner, KPMG India. Over the past three years, the head count of KPMG Forensic has almost doubled on account of various initiatives. The consulting firm, one of largest in India by employees, has 600 forensic managers. Indian companies, which focused on growth overlooking internal controls and compliance, are now scrutinising internal operations and cutting costs as the economy shows signs of slowdown. Frauds, committed in the growth phase, may come to light only during slowdown.
Deloitte Touche and Tomatsu India increases its headcount roughly by 30% every year. Mostly, hiring in the forensic department depends on the client requirement and during slowdown, the requirement increases, Neeta Potnis, senior director, Deloitte Touche Tohmatsu India, said.
The rift between investors and owners add to demand for forensic experts in consulting firms. Private equity investors Bain and TPG in kids wear apparel maker Lilliput have taken owners to court alleging Lilliput founder Sanjeev Narula fudged the companys financial accounts. Narula, in turn, had said the investors were trying to halt the companys planned R850 crore public offering and take a majority stake.
Mobile telephony company Uninors partners Norways Telenor and Unitech Realty are fighting a legal battle at the Company Law Board over a proposal for a R8,200-crore rights issue. Telenor paid R6,135 crore to purchase a 67.35% stake in the mobile telephony company, which had a pan-India licence and spectrum or radio waves which carries air waves. The company had licence and spectrum, but the owner is alleged to be involved in the 2G scam, a managing director of a private equity fund said. How will you access these risks We will invest in companies with no government involvement and with no legally binary outcome, he added. He and his firm cannot be quoted on such sensitive issues.
Frequent audits have limited the scope for abusing the systems and processes, Seshagiri Rao, JSW groups chief financial officer, said. Corporates today not just focus on financials, but also on technology and legality. Also, due-diligence is done in various stages which mitigates the risk of a fraud, he added.
Over 15% of the frauds are detected through management reviews, nearly 14% through internal audits and over 40% of the occupational frauds are detected through whistleblower tips, Association of Certified Fraud Examiners (ACFE) Report to the Nation 2010 published in the USA shows. The others come in the limelight by accident, external audits and IT controls. The ACFE is the worlds largest anti-fraud organisation and premier provider of anti-fraud training education and certification.
In India, whistle-blowing is the most frequent cause for fraud detection. Frauds committed by owners or senior managers cause more losses than those caused by lower level employees.
Average loss owing to fraud in India is $0.7 million as compared to $1.1 million in America and $0.9 million in Europe, West Asia and Africa, a report Profile of a Fraudster published by KPMG shows. Fraud detection takes longer in India with five years as compared to 3.4 years globally.
Procurement related fraud is the most likely as it is the largest expense in a corporate after payrolls, Vidya Rajarao, leader forensic services, PricewaterhouseCoopers India, said. One must closely look at the suppliers selected and tighten the tendering process to curb it.
Training sessions are held on use of forensic technology including proprietary tools which can help identify potential high risk transactions and patterns, Rao of JSW said.
Health checks are conducted for clients to identify high risk areas so as to mitigate fraud risks and risk of non-compliance with anti-bribery legislations, Potnis of Deloitte said. Along with such a review, an analysis of accounting records and transactions that have taken place during an accounting period is also conducted to identify high risk transactions.