Around 63% independent directors (IDs) believe fraud cases, spurred by the Covid-19 pandemic-induced current business environment, will rise in 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 cybercrimes (23.90%) and financial statement fraud (20.96%) are likely to be amongst the increasingly common frauds to be experienced in the near future.
The survey, titled Corporate fraud and misconduct: Role of Independent Directors, further revealed that large scale remote working as well as cash flow crunch were ascertained as the main factors for the expected rise in frauds.
Also Read: India reports 11.8% jumps in cyber crime in 2020: NCRB data
“Although there are multiple priorities for those charged with corporate governance, given the current economic climate, it is likely that some organisations may seek to focus on prioritising sustainability of operations over other matters. Under such circumstances, IDs need to 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 increased manifold in recent years, the survey noted that around 75 per cent IDs believe that they could play a significant role in fraud prevention and detection.
Moreover, around 57 per cent IDs indicated that their board had established an effective Fraud Risk Management (FRM) framework, the survey said, adding that training on FRM is the need of the hour.
“… the results also highlight the need for organisations to critically evaluate 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.
Also Read: SEBI bars anchor Pradeep Pandya, expert Alpesh Furiya from advising on securities market
According to Lt. Gen. J. S. Ahluwalia, PVSM (Retd.) – President, IOD, over the years the role of IDs have only enhanced and regulators are increasingly becoming dependent on them for good corporate governance.
“In the survey, IDs have shown keenness to take on a greater role in being an effective deterrent to fraud, mismanagement, and lapses in corporate governance. Of course, we will need to suitably prepare them for this additional role”, he said.
The survey report has been developed based on the responses received on a questionnaire that IOD circulated to IDs serving on public company boards across all major sectors in July and August 2021. The survey received around 110 ID responses.
(With inputs from PTI.)