An insight into fraud

Executive Director Forensic Services at KPMG India Gaganpreet Singh Puri has led a large number of investigations, fraud risk management and dispute resolution engagements, including loss of profit computations and quantifications of damages and claims. He has just returned from a two-year engagement in New York. As incidences of fraud escalate, Daily FT caught a glimpse of an auditor

By Dinali Goonewardene

Q: What is forensic audit?

A: Forensic audit is the application of services to the accounting domain where facts and accounts don’t agree. We are called to see the extent to which the accounts differ and who is involved.

Q: How big a problem is fraud?

A: Fraud is a major problem in parts of the world and changes in terms of the complexity, profile and amounts involved. Fraud is evident in changed financial statements, etc., and stock market fraud has become equally significant.

Q: Which sectors are vulnerable?

A: Globally; typically financial services, consumer markets. They are easy to perpetrate because of the large number of transactions, multiple stakeholders involved etc. It differs from country to country and economy to economy.

Q: What is the profile of a fraudster?

A: Male; 36-40 years old; in a senior management position; employed with the company; all financial related functions as per the global profile of a fraudster survey.

Q: How is fraud discovered?

A: Whistle blowing; anonymous letters; by internal audit; and by accident.

Q: What are the motives for fraud?

A: People’s needs, financial problems in the family and greed. Then there is work-related fraud. There is pressure on people to perform: financial statement fraud, fudging sales, etc.

Q: Is there collusion in committing fraud and how do you avoid it?

 A: By putting in a proper prevention and detection system. It can only be minimised.

Q: How much does it cost to investigate fraud?

A: The cost can be substantial. There is no co-relation between the value of the fraud and the cost of investigation. Even if somebody does it internationally it costs as much.

Q: How do you manage fraud?

A: By proper prevention, detection and response.  Prevention includes having a proper code of conduct and conducting regular fraud risk assessments. Prevention includes carrying employee back ground checks, customer due diligence and effective preventive measures on detection. Companies need to proactively monitor internal control systems through information Technology systems analysis and in response need to have clear investigation protocols, law enforcement liaison and media monitoring strategies.