Auditors Responsibility in the Era of Corporate Fraud
A Corporate Fraud is defined as a set of Activities undertaken by a company or set of individuals that are done in a dishonest or illegal manner, and are designed to give an advantage to the perpetrating company or the individual. Corporate fraud schemes go beyond the scope of an employee's stated position, and are marked by their complexity and economic impact on the business, other employees and outside parties. Corporate Frauds are becoming very inherent in the present era. A selected range of individuals are illegally benefitting from such corporate frauds at the cost of investor wealth, confidence and value and the reputation of the company. Corporate frauds are seen in various forms such as fabrication of financial statements through overstatement of assets and understatement of liabilities, misutilisation of public wealth by selected individuals, over/under invoicing, capital markets, criminal breach of trust and pursuing business in an uncompetitive manner through underhand means such as bribing, coercion. The use of corruption to make various day to day activities easy for the company which involves spending investor money illegally is a very commonly seen mechanism. On a daily basis news relating to such fraudulent activities is noticed. The main sources through which such frauds are committed are Management Overriding Controls and Tampering with Financial Statements.
Some scams such as Enron of USA and Satyam scam of India have come in the picture and shattered investor confidence. Although Corporate Scams are connected to corporate houses, it is generally seen that all government scams somehow or the other bring big corporate houses in the picture. Hence, these are also an extension of corporate frauds. Examples being the 2G and 3G Scam by telecom minister A.Raja involving Aircel, Swan Telecom and others. These telecom operators obtained 3G licenses in 2009 at 2006 prices uncompetetively and unethically. When this came in the limelight, they had to not
Some scams such as Enron of USA and Satyam scam of India have come in the picture and shattered investor confidence. Although Corporate Scams are connected to corporate houses, it is generally seen that all government scams somehow or the other bring big corporate houses in the picture. Hence, these are also an extension of corporate frauds. Examples being the 2G and 3G Scam by telecom minister A.Raja involving Aircel, Swan Telecom and others. These telecom operators obtained 3G licenses in 2009 at 2006 prices uncompetetively and unethically. When this came in the limelight, they had to not