Rise in financial fraud sore point for foreign investors:Study

A rising incidence of financial fraud over the past few years has emerged as one of the sore points for foreign investors in India, a study paper today said.
"Cases of financial fraud have risen in India over the last few years and become one of the main factors deterring foreign companies from investing in India. As the economy is growing, increasing corporate frauds will prove to be disastrous for India," the Assocham-Grant Thornton paper warned.
The paper acknowledged that entry into India serves as a critical component of growth for many global entities, but understanding its inherent risks too is key to their business survival.

Listing out several challenges, the joint paper expressed concern that financial managers and accountants who understand limitations of an audit and standard auditing procedures are deliberately trying to deceive external auditors and investors by cooking the books.
"Devious ingenuity of the human brain is now leveraging technology to indulge in more sophisticated methods of crimes which are very much capable of creating systemic instability," Assocham President Sunil Kanoria said.
Grant Thornton India Partner Vidya Rajarao felt that the initiative to stop frauds must "come from the top".
"The responsibility of preventing, detecting and investigating corporate and financial frauds rests squarely on board of directors and this requires board members to adopt preventive steps," Rajarao said.

"Also, the board and the top management should jointly agree and define their anti-fraud strategy, establish appropriate fraud mitigation steps and train their employees to combat financial and corporate frauds.