Top reasons for fraud include diminishing ethical values, lack of efficient control system, inadequate due diligence
A large number of respondents in a survey carried out by Deloitte expect fraud to go up over the next two years.
According to Deloitte’s India Fraud Survey Edition II, in perspectives from companies with over Rs 200 crore turn over and/or over 200 employees, 70 percent of respondents felt incidents of fraud will increase in the next two years.
Top reasons that contribute to fraud include – diminishing ethical values (38%), lack of efficient control system (37%), inadequate due diligence (37%) and unrealistic goals linked to monetary compensation (37%).
Vendor favoritism (42%), diversion/ theft of funds (33%) and bribery and corruption (30%) were the top fraud incidents experienced by organizations.
Junior and middle management employees were considered the most likely to commit fraud. The top three measures undertaken to prevent fraud include – Internal Audit/ Risk assessment (89%), Tone at the top and implementation of anti-fraud policies (79%), and fraud awareness workshops and trainings (66%). Fraud is mostly detected through whistleblower hotlines.
Response to fraud is complex and determined on a case to case basis – 43% said investigations were commenced based on the severity of fraud; 36% said the fraudster was allowed to resign in lieu of pressing legal charges; and 33% said fraud was communicated to employees, the Board and regulatory agencies.
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In small and medium enterprises survey, 54% of respondents felt incidents of fraud will increase in the next two years. The top three reasons that contribute to fraud include the following – diminishing ethical values (68%), limited/ lack of segregation of duties (68%) and limited employee education on fraud (60%).
Top three frauds experienced by organizations include – Diversion/ theft of funds (32%), bribery and corruption (28%) and conflict of interest (26%).
The most common forms of corruption experienced include – collusive bribery (69%) and facilitation payments (69%). Procurement (44%) and sales and distribution (29%) were considered the functions most vulnerable to fraud risks.
In the survey of working professionals’, 65% of respondents felt incidents of fraud will increase in the next two years. Top three reasons that contribute to fraud include – weak/ ineffective controls (65%), technological advancements (43%), and general decline in ethical values (42%). The top three frauds experienced by organizations include – bribery and corruption (43%), financial statement fraud (40%), and embezzlement of funds (39%).
Frauds personally experienced by working professionals include bribery and corruption at government offices (59%), identity theft (37%) and sector specific frauds (31%).
In response to fraud, 55% of respondents claimed they did nothing as there was no way to recover losses.