Early warning signals of Corporate frauds
warning signals of corporate frauds with emphasis on Satyam Scandal
has been taken to identify a set of exceptional transactions, that
will act as benchmark for the industry to investigate the financial
transactions for the possibility of the fraud. The early warning
signals of corporate frauds is an indicator for the decision makers
about the wrongdoings in the organisation. This benchmark will help
the business in reducing the losses caused to the organization by the
financially fraudulent activities by addressing the issues of frauds
at an early stage. Further project is aimed to create
awareness about the opportunities pertaining to forensic accounting
and to prevent the frauds by understanding the early signs and thereby
taking the appropriate action.
August'2008 we have made available the study on Early warning signals
of the corporate frauds. More than 300 professional Chartered
Accountants from India and abroad participated in this and results of
this survey are available in public domain.
research is divided in two aspects - One the survey of the Indian
forensic accountants and the forensic accounting students in India
[available for free download] and the second part is the study of the
Early warning signals that the various stake holders of the
organisations should know about the frauds. Early Warning Signals also
termed as the Red Flags in certain parts of the world. This study is
the compilation of many such transactions that could act as the early
warning signals of the frauds. There are primarily two types of the
against the business
for the business
about these schemes in the Certified
Forensic Accounting Professional Syllabus.
compilation of Early Warning Signals of Frauds in India is a unique
collection of the transactions in various corporate scenario. This is
the first step towards strengthening antifraud framework in our
address symptoms of various fraud schemes which can be sub classified
under the above mentioned two schemes.
has a national significance and the excerpts of the Economic Times
article are provided here for the kind reference.
the initial concept, if the early warning system detects evidences or
any trends indicating frauds or cheating, the ministry will have the
right to initiate an inspection under provisions of Companies Act,
1956. The data on frauds will also be passed over to various Central
government agencies dealing with money laundering, auditing and other
financial frauds. According Mayur Joshi, chairman, Indiaforensic
Research Foundation, a Pune-based consultancy organization engaged in
fraud examination and forensic accounting, the early warning signals
are divided in two parts globally - warning signals of the frauds done
for the company and indicators of the frauds done against the company.
"Frauds broadly covers financial statement frauds like recognizing
the revenues too early in the balance sheet in order to meet the
analyst expectations or in case of the SME's the frauds which are
committed to evade the taxes. Frauds against the company affects the bottom line
of the company, for instance traveling claims, inflation, embezzlement
of funds and payroll frauds," he explained."
is converted into a publication captioned as the Early Warning Signals
of corporate frauds which has also covered the early warning signals
in the Satyam fraud which were continuously ignored for number of
years together. This publication has a special emphasis on the Satyam
Like frauds. One topic is devoted for the early warning signals that
were ignored in the Satyam Fraud.
more readers to read this research we have split the research in two
versions. Those interested in understanding the Satyam related warning
signals can buy the Version 1.0.0 of the Early Warning Signals of
Corporate Frauds which includes the Satyam Story and those not
interested in Satyam scandal may purchase the Version 2.0.0 of this
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