Is corruption a common practice in corporate India?

Moneycontrol Bureau

Corruption - a social malaise is spreading its venomous tentacles in the corporate India as well, besides in politics. Doctoring of the financial statement in India is a very common fraudulent practice whether it is for hiding poor performance or for routing bribes or for fooling investors, revealed a survey conducted by Ernst & Young LLP from March to May 2013.

The survey is christened as Europe Middle East India and Africa (EMEIA) Fraud. Over 200 respondents, who work as senior executives in different business functions, participated in the survey.

"59 percent respondents of the EY bribery and corruption survey in India have heard of at least one such fraud happening in their company and 37 percent stated that revenues were recorded before they should be to meet short - term financial targets," the survey said.

As many as half the respondents said that their companies had lost business to their competitors due to the latter’s unethical conduct. Around 89 percent of EMEIA Fraud survey respondents selected cash from the long list of possible modes of offering bribes.

"In the current challenging market condition, the incentives for unethical conduct can be strong when personal remuneration is at stake and pressure to deliver growth is being felt directly. Complicity can make companies vulnerable to repeated illegal demands, result in cost escalation and compel them to commit economic offences, including fraud and forgery, for unaccounted cash flows," said Arpinder Singh, partner & India leader - fraud investigation and dispute services, EY.

Who is accountable for such corporate frauds?

Managing Director (MD) or the head of the company should be held responsible for issues related to corruptions. About 77 percent of the Indian bribery and corruption survey respondents felt it.

Way to resolve this menace…

As a step towards combating bribery and corruption, companies are looking at undertaking robust compliance programs. This comes out in the survey, where more than 90 percent of respondents said that their company has an anti-bribery and corruption policy, standalone or covered under the code of conduct policy. 

"Given the rise in corruption cases, companies are likely to face greater scrutiny on governance and compliance measures. The Government continues to do its bit to improve the business environment and the regulatory steps….However, it’s also imperative for private sector to play an active role by laying emphasis on business integrity and being intolerant to unethical conduct," said E&Y’s Arpinder.

saikat.das@network18online.com