A significant percentage of independent directors believe the current pandemic-induced business environment may stimulate fraud over the next two years, a survey shows.
Deloitte Touche Tohmatsu India LLP (DTTILLP), in association with the Institute of Directors (IOD), published a survey âFraud and Misconduct in Business: Role of Independent Directorsâ, the findings of which reflect that approximately 63% of directors independents (IDs) believe that fraud cases will increase over the next two years.
Large-scale remote working and the cash flow crisis were identified as the key factors in the expected increase in fraud, according to the survey. Cybercrimes and financial statement frauds are likely to dominate fraud schemes, he added.
“While there are multiple priorities for those charged with corporate governance, given the current economic climate, it is likely that some organizations are looking to focus on prioritizing the sustainability of operations over other issues. . In such circumstances, IDs must act with the highest standards of vigilance and prudence, âsaid Rohit Goel, Partner, Forensic, Financial Advisory, DTTILLP.
About 75% of IDs believe they could play an important role in fraud prevention and detection.
Additionally, around 57% of IDs said their board has an effective Fraud Risk Management (FRM) framework in place, according to the survey, adding that FRM training is the need of the moment. .
ââ¦ The results also underscore the need for organizations to critically assess the effectiveness of the existing fraud risk management framework in light of a rapidly changing business environment,â said Nikhil Bedi, Partner and Leader , Forensic, Financial Advisory, DTTILLP.
While the responsibilities and accountability of IDs have grown in recent years, the survey noted that around 75% of IDs believe they could play an important role in preventing and detecting fraud. .
âOver the years, the role of IDs has evolved and improved, and regulators increasingly depend on the vital role of IDs in good governance. IDs chair or are members of the majority of board committees, including the internal audit committee.
âIn the survey, IDs showed their willingness to play a greater role in effective deterrence against fraud, mismanagement and corporate governance failures. Of course, we will have to prepare them appropriately for this additional role, âsaid Lt. Gen. JS Ahluwalia, PVSM (Retd.) – President, IOD.
This survey report was developed based on responses received to a questionnaire that IOD distributed to IDs on boards of SOEs in all major sectors in July and August 2021. The survey received about 110 responses from ID.