Around 63% of independent directors (IDs) believe fraud cases, boosted by the current business environment induced by the Covid-19 pandemic, will increase over the next two years, according to a survey released by Deloitte Touche Tohmatsu India LLP (DTTILLP), in association with the Institute of Directors (IOD).
The survey showed that cybercrime (23.90%) and financial statement fraud (20.96%) are likely to be among the increasingly common frauds in the near future.
The investigation, titled Corporate Fraud and Misconduct: The Role of Independent Directors, further found that large-scale remote working as well as the cash flow crisis were the main drivers of the expected increase in fraud.
Read also: India reports 11.8% increase in cybercrime in 2020: NCRB data
“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 sustainability of operations over other issues. . In such circumstances, IDs must act with the highest standards of vigilance and prudence, ”said Rohit Goel, Partner, 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. .
Additionally, around 57% of IDs said their board has an effective Fraud Risk Management (FRM) framework in place, the survey found, adding that FRM training is the need of the moment. .
“… the findings 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,” said Nikhil Bedi, Partner and leader, Forensic, Financial Advisory, DTTILLP.
Read also: SEBI bans Pradeep Pandya, expert Alpesh Furiya from advising on the securities market
According to Lieutenant-General JS Ahluwalia, PVSM (retired) – President of IOD, over the years the role of IDs has only improved and regulators increasingly depend on them for good corporate governance.
“In the survey, IDs have shown their willingness to play a greater role in effectively deterring fraud, mismanagement and corporate governance failures. Of course, we will need to prepare them appropriately for this additional role, ”he said.
The survey report was developed based on responses received to a questionnaire that IOD distributed to IDs serving on boards of SOEs in all major sectors in July and August 2021. The survey received about 110 responses from ID.
(With entries from PTI.)