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1200 Indian firms resort to manipulation of facts
By siliconindia
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Friday, 19 September 2008, 16:28 IST
Mumbai: The rickety Indian economy made many listed companies on the stock exchange to turn round their financial figures to comply with market expectations.
Among 4,867 companies listed, on the Bombay Stock Exchange and 1,288 companies listed on the National Stock Exchange, almost 1,200 companies, including 25-30 firms on the benchmark of Sensex and Nifty indices, were found to be on the guilty line
As per a study 'Early Warning Signals of Corporate Frauds' by the Institute of Chartered Accountants of India (ICAI), and Indiaforensic Consultancy Services, around 73 percent of those surveyed resorted to the swindle to attain analyts' expectations while the unlisted firms opted for it to avoid taxes and attract investments from foreign firms. These unexpected findings have evoked significant reaction. Commenting on the trust involved in the figures mentioned by those listed firms, Vidya Rajarao, Executive Director of Financial Advisory Services at consultancy PricewaterhouseCoopers says, "Accounting fraud is the most egregious fraud because it goes against the basic concept of investor confidence in financial statements, if these are manipulated then there is no other information which is trustworthy."
The study scanned through the 11 prominent sectors of the Indian market, which includes real estate, retail, banking, manufacturing, insurance, public sector undertakings, mutual funds, transport and warehousing, media and communications, oil and gas and information technology. And the manufacturing section, which contributes 28 percent of the gross domestic product in the country, is said to top the chart in erring the financial statements with 20 percent of the auditors agreeing to it. Reasoning this Vijay Kewalramani, a Mumbai-based independent chartered accountant said, "In manufacturing the regulations are hardly strict and there is a lack of enforcement, resulting in such frauds."
Moreover, the research also threw light on the reluctance of the companies to report on fraud incidences of the company with only 25 percent of the 340 chartered accountants who responded to the survey admitting that 20 to 30 percent of the clients indulge in such manipulation.
