New Delhi: Most frauds in companies are committed by members of the management, who exploit inadequate internal controls for their personal benefits, resulting in substantial damage to the organisation, according to a KPMG survey.
“Over 60% of the perpetrators are members of top management. Senior managers have access to confidential information and their position makes it is easier to bypass internal controls and inflict greater damage to the company,” KPMG Forensic India head and executive director Deepankar Sanwalka said.
Both large and small businesses can be affected by this and suffer considerable material and immaterial losses, he said.
Fraudster Survey 2007 by KPMG revealed that a typical fraudster is male aged between 36 and 55 years and working in financial department of the company for six or more years. The desire for money and opportunity are the key factors which drive a person to commit fraud.
The survey took into account 360 cases entrusted to the forensic departments of KPMG in Europe, the Middle East, India and Africa.
In India and Middle East, corruption accounted for the most common fraud at 33% followed by theft of cash and other assets at 24% and 17% respectively. False financial reporting, embezzlement and kickbacks were also common, the report stated.
The financial damage inflicted by fraudsters is severe. “Companies rarely succeed in making good the financial damage and the issue of compensation usually takes several years to clear up,” Deepankar said.
The survey found the offenders to be have committed multiple frauds over an extended period before being caught. In 91% cases investigated, officers committed several offences before being nabbed.
In 76% cases, the time span of frauds was more than six months and in 33% three or more years, the survey revealed.
In most of the cases, after catching the offenders, the companies preferred to undertake independent investigations instead of informing the police or public authorities for fear of negative image.