Companies add muscle to internal investigation teams to thwart fraud

With regulatory requirements getting stringent, more and more corporates are beefing up their in-house investigation capabilities with dedicated teams to keep vigil on possible fraud.

Seeking to ensure they are on the right side of the regulatory framework, the companies are also assigning senior officials the responsibility of ensuring compliance with the strict norms.

Thanks to the new companies law and revamped Sebi norms, both listed and unlisted entities are also roping in external agencies for establishing internal investigation teams, according to experts.

Leading consultancy Grant Thornton India Partner Vidya Rajarao said companies have been approaching it for formulating a fraud risk policy.

"A company recently approached us for formulating fraud risk policy. We help them in detecting fraud, reporting it and preventing such incidents in future. So, we are aiding companies in dealing with the complete thing," she noted.

Even before revised regulations came into force, some companies had established in-house investigation capabilities, but the trend has been increasing in recent times.

Not just the large companies, but small and medium firms are strengthening their internal systems as part of larger efforts to protect interests of investors.

Consultancy PwC India Partner and Leader Forensic Dinesh Anand said the investigations department at a company is generally headed by a dedicated senior management personnel.

Usually, such units are formed by moving existing internal audit or compliance team members and hiring forensic experts.

"Lately, we are seeing an increasing trend of companies wanting to set up a separate investigation function and in many cases are seeking our assistance," Anand said.

According to experts, companies are also investing in forensic technology tools to guard against possible frauds.

Consultancy KPMG in India Partner and Head (Accounting Advisory Services) Sai Venkateshwaran said that with new laws and regulations coming into effect, several things that were dealt with in an informal or unstructured manner are now being looked at in a more structured and formal manner.

"Now, there is greater rigour in the processes to prevent or detect frauds, irregularities and to ensure compliance in general, as these key persons are now likely to be held accountable," Venkateshwaran said.

Apart from appointing senior officials to keep a tab on possible misdoings, many companies are taking the help of outside agencies in this regard.

Under the Companies Act, 2013, auditors are required to report to the government when they come across instances of fraud at a firm.

Last month, the Corporate Affairs Ministry had said auditors are required to report any suspected corporate fraud amounting to Rs 1 crore or more to the central government.

Most provisions of the Act came into force from April 1, 2014.

Meanwhile, at least 16 top listed companies have formed teams and identified key managerial persons who would be responsible to ensure disclosures are done in a timely manner and are in compliance with regulatory requirements.

This article was published in the Economic Times, to read please click here.