Company Suffers Rs. 3 Bn. Loss
KPMG Sri Lanka’s inaugural Fraud Survey Report which began during the latter part of last year was released on Wednesday.
Called KPMG Sri Lanka’s Fraud Survey Report 2011/12, one of the key frauds unearthed in this report was a Rs. three billion fraud that had hit a company coming under the industrial sector.
What sort of action was taken against the person/s involved in this fraud was however not a mandate in this report.
It’s said that fraud robs a country of 2% of its GDP (that works out to US$ 1.2 billion in Sri Lanka’s case). The smallest case of fraud was Rs. 2.5 million, that hit an organisation coming from the agriculture sector.
Meanwhile the names of the institutions that suffered these frauds were not revealed as such information was confidential.
The survey was conducted online with some 100 institutions participating, including NGOs. However state owned enterprises (SOEs) were not captured in this survey, with participating institutions comprising both quoted and non quoted companies, with annual turnovers ranging from Rs.50 million to Rs. 10 billion and a staff strength of between 100-5,000 employees.
The purpose of this survey was to persuade lawmakers to bring in legislation to minimize such frauds, including protecting the rights of whistleblowers. The interviewees comprised senior managers of those institutions.
A press release said that 27% of the fraudsters were from top management, 46% (lower management) and 27% vendors, customers and business associates of the organisation.
KPMG had originally sent invitations to some 400 organisations to participate in this web based survey, but only 100 had responded.
Among some of the other broad findings in this survey were 83% of the interviewees saying that fraud is increasing in Sri Lanka, 62% of the respondents saying that their particular industry sector was plagued with fraud and 51%, that fraud was prevalent in their own organisations.
Fraud takes many shades, including bribery and corruption, diverting of funds and goods, IP fraud and the cooking up of books. Thirty six per cent of such frauds, ie frauds captured in the survey were detected by audit, 9% (whistle blowing), 17% (by anonymous petitions and data analysis respectively) and 15% (by accident).
Eighty three per cent of frauds took place by drawing of funds, 17% by third parties and 54% by bribery and corruption. KPMG India Partner & Head, Risk Consulting Practice Deepankar Sanwalka told reporters in Colombo that laws may be there, but what is required is their enforcement. KPMG India has been conducting such surveys since 1995. Frauds in “procurement,” inflating of a company’s stock market price and then dumping those to unsuspecting investors also come under the “fraud” nomenclature.