Frauds during covid 19: The risk of financial statement fraud in the wake of COVID-19 has been saved
Frauds during covid 19: The risk of financial statement fraud in the wake of COVID-19
The spread of COVID-19 has resulted in an abrupt halt in the global economic activity. The impact of this forced lockdown is expected to result in a severe economic downturn with the contraction of global economy by 3 percent in 2020 and a low growth rate forecast of 0.8 percent for the Indian economy for the current fiscal year 2020–21.
Corporates worldwide are struggling significantly to manage their operations, generate cash, and keep their businesses afloat. This is adding to the pressure of meeting performance targets and market and stakeholder expectations. As a result, organisations may be tempted to take desperate measures including manipulating the books of accounts to avert corporate failure.
Regulators have already expressed their concerns about the expected increase in corporate frauds as a result of the crisis, for instance, the US Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) have issued a notice that they will be actively investigating and prosecuting COVID-19-related frauds. Further, from our point of view and as witnessed in multiple cases in the past, instances of corporate cover-ups through innovative accounting or manipulation in the books of accounts spanning years tend to come to light during a downturn/recession.
Stakeholders therefore need to be vigilant for financial statement fraud schemes. Some common types of financial fraud schemes are listed in our latest white paper.