Fraudulent Accounting Practices: A Growing Concern in India’s Business Landscape
A new study published in the International Journal of Advanced Research in Commerce, Management & Social Science sheds light on the increasing trend of accounting frauds in India. Dr. Deepak Verma and Mr. Bablu Gamaprasad Sonkar from Chhatrapati Shivaji Maharaj University in Navi Mumbai led the research, which investigates essential aspects of accounting frauds in India and possible solutions.
Overview of Accounting Fraud
Accounting fraud, also known as financial statement fraud, impacts the general public and negatively influences the economy. This type of fraud often involves the misappropriation or manipulation of public funds for personal gain. With the progression of technology, instances of accounting fraud have escalated in India.
Ways Accounting Fraud Can Be Perpetrated
- Manipulation of accounting policies
- Induced operational and financial decisions
- Fraudulent transactions
- Cybercrimes such as KYC frauds, identity theft, and UPI payment frauds
Fraudulent Transactions
Accounting fraud can also include:
- Booking revenue expenditure as capital expenditure or as deferred revenue expenditure
Prevention and Detection of Accounting Frauds
Proper internal control systems are crucial for the prevention and detection of accounting frauds. Effective systems can monitor transactions, enforce policies, and ensure compliance with relevant laws and regulations. Inadequate internal controls make it hard to identify and address fraudulent activities, leading to substantial economic losses for the country.
Responsibilities for Prevention and Detection
- Audit committees
- Internal auditors
- Management
Executive Board
The executive board is responsible for preventing and detecting fraud.
Audit Committees
Audit committees are responsible for supervising management efforts against fraud.
Management
Management plays a significant role in preventing and detecting fraud.
Internal Audit
Internal auditors identify red flags of fraud and monitor risks. They also evaluate the effectiveness of fraud prevention measures and implement new strategies as needed.
Despite proper internal controls and prevention strategies, no system is foolproof. Fraudsters continually adapt and commit intricate schemes. Therefore, ongoing investigations of fraud cases and their causes, as well as collaborations among stakeholders, are essential to stay informed and respond to the evolving fraud landscape.
Contribution to the Body of Literature
This comprehensive study contributes to the existing body of literature on fraud detection and prevention, focusing specifically on the Indian context, providing a deeper understanding of the complex factors driving accounting frauds in the region.