June 19, 2018

KPMG Survey: India is a Hotbed for Fraud Due to Competition, Diminishing Ethical Values

In this morning’s Roundup, we told you about the ICAI belly-aching about the Big 4 circumventing the rules in India to the point of extreme annoyance but technically not breaking said rules.

Strangely enough, BusinessWeek has a story today that cites a KPMG report that found that fraud is on the rise in India due not to shifty international accounting cooperatives but rather to, among other things, the pressure of increased competition in the last two years.


As you might expect, fraud due to financial reporting is the biggest problem. The report cited, “weak rules and the inability of authorities to enforce regulation.” Other things mentioned as opportunities for chicanery:

• “Volatile economic conditions”
• “Increasing business and technological complexities”

So does that mean opportunities for fraud are ubiquitous? Do the respondents really believe that India is the only place where this is happening?

And the attitude/lack of self-control part of your triangle:

• “Diminishing ethical values”
• “Failure on part of managers to act against deviations from established policies and processes”

Diminishing ethical values? Deviating from established policies? Again, the respondents can’t think this is unique to India so shall we just assume that it’s more widespread there?

Some other contributing factors cited were “executives vying for higher pay, weak internal controls and increasing competition…for market share.” But wait! KPMG’s survey said that there were “’encouraging signs’ that mechanisms for detection of fraud through internal audits had improved.” That’s nice despite the fact that sounds similar to something that Overstock management said in their earnings call yesterday.

If you have “weak rules” accompanied by spineless bureaucrats that won’t even enforce those rules, of course you’re going to have some problems. ICAI seemingly wants to blame everything on the Big 4 probably because that’s the going trend these days. We’re not saying you can’t throw some blame towards PwC for missing the phantom $1 billion at Satyam but if your financial reporting regulatory infrastructure is akin to the something out of Deadwood, circa 19th Century, then maybe you should be more consider making some fundamental changes.

Fraud Rises in India as Competition Increases, KPMG Study Says [Bloomberg BusinessWeek]

In this morning’s Roundup, we told you about the ICAI belly-aching about the Big 4 circumventing the rules in India to the point of extreme annoyance but technically not breaking said rules.

Strangely enough, BusinessWeek has a story today that cites a KPMG report that found that fraud is on the rise in India due not to shifty international accounting cooperatives but rather to, among other things, the pressure of increased competition in the last two years.


As you might expect, fraud due to financial reporting is the biggest problem. The report cited, “weak rules and the inability of authorities to enforce regulation.” Other things mentioned as opportunities for chicanery:

• “Volatile economic conditions”
• “Increasing business and technological complexities”

So does that mean opportunities for fraud are ubiquitous? Do the respondents really believe that India is the only place where this is happening?

And the attitude/lack of self-control part of your triangle:

• “Diminishing ethical values”
• “Failure on part of managers to act against deviations from established policies and processes”

Diminishing ethical values? Deviating from established policies? Again, the respondents can’t think this is unique to India so shall we just assume that it’s more widespread there?

Some other contributing factors cited were “executives vying for higher pay, weak internal controls and increasing competition…for market share.” But wait! KPMG’s survey said that there were “’encouraging signs’ that mechanisms for detection of fraud through internal audits had improved.” That’s nice despite the fact that sounds similar to something that Overstock management said in their earnings call yesterday.

If you have “weak rules” accompanied by spineless bureaucrats that won’t even enforce those rules, of course you’re going to have some problems. ICAI seemingly wants to blame everything on the Big 4 probably because that’s the going trend these days. We’re not saying you can’t throw some blame towards PwC for missing the phantom $1 billion at Satyam but if your financial reporting regulatory infrastructure is akin to the something out of Deadwood, circa 19th Century, then maybe you should be more consider making some fundamental changes.

Fraud Rises in India as Competition Increases, KPMG Study Says [Bloomberg BusinessWeek]

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SHOCKER: Doesn’t Appear that Stanford Auditors were Doing Any Auditing

allen-stanford_1018295c.jpgLast week’s indictment of Allen Stanford has brought up the always popular question when fraud, occurs: “Who are the auditors that were asleep at the wheel of this disaster?”
Well, in this case, the auditors were a local UK two-person shop, CAS Hewlett, which must be Queen’s English for Friehling & Horowitz.
It doesn’t appear that CAS Hewlett has a website, but they’ve been doing the Stanford “audits” for at least 10 years, so obv they’re legit. PwC and KPMG both have offices on Antigua but Stanford preferred to stay with its “trusted firm”. Totally understandable.
And the best part? The founder of the firm, Charlesworth “Shelly” Hewlett died in January, approximately a month before the story broke on the Ponz de Stanford.
This all adds up to who-the-fuck-knows if audits were even occurring and for us to speculate if Shelly needed to get got because Stan knew that the poo and fan were coming together. Just sayin’.

New Bail Hearing for Stanford Set for Monday Because He Just Might Split

Stan the Man will spend the weekend pumping iron in a Houston jail because all signs are kinda, sorta pointing to the possibility of him going on the lam after a judge granted the silver medalist in the Ponzi competition a measly $500,000 bail.
Stanford’s attorney called bullshit because “he had already shown the financier was no flight threat.”
Judge David Hittner didn’t buy it and remanded Stan to jail until Monday based on the evidence presented by prosecutors:

testimony from a pilot who flew Mr. Stanford to Libya and Switzerland before government officials raided his Houston offices; testimony from a friend of Mr. Stanford’s daughter who gave him $36,000 in cash, and claims that $100 million was withdrawn from a Swiss bank account Mr. Stanford controlled

C’mon, your honor, that’s just walking around money! My client can’t be expected to strut around without serious money on hand!

New Bail Hearing Set for Stanford
[WSJ]