Commerce Research Review, Vol. I, No.

2; June 2024 E-ISSN:2584-234X

Unveiling the Global and Indian Landscape of Fraud: Investigating Financial, Geopolitical, and
Ecological Consequences and Countermeasures

Ashish Saxena1, Zubia Akhtar Shaikh2, Dr. Manish Verma3

1
Assistant Professor,, Sharda School of Business Studies ,Sharda university ,Delhi NCR, India
2
Research Scholar, School of Business Studies , Sharda university , Delhi NCR, India
3
Associate Professor, MIE SPPU Qatar

Abstract
This article examines the global and Indian landscape of fraud, with a focus on financial statement fraud and its implications. Real-life cases,
including the Enron scandal, the Bernie Madoff Ponzi scheme, and the Nirav Modi-PNB fraud case, demonstrate the magnitude and impact
of fraud. Financial statement fraud, involving deceitful practices in financial reporting, can lead to severe consequences such as bankruptcy,
job losses, and a loss of trust in corporate governance. Fraud also has geopolitical implications, undermining confidence in financial markets
and triggering discussions on corporate governance reform. Additionally, fraud can have ecological consequences, particularly through
greenwashing practices. To combat fraud effectively, strategies such as strengthening regulatory frameworks, enhancing corporate
governance practices, and investing in advanced technologies for fraud detection and prevention are crucial. Fostering a strong ethical culture
and implementing robust risk management frameworks are also essential in mitigating fraud risks. By addressing fraud, societies can protect
their economies, promote transparency, and encourage sustainable and ethical practices.

Key-Words: - Fraud, Financial fraud, Geopolitical consequences, Ecological consequences, corporate scandals, Fraudulent financial
reporting, Misappropriation of assets, Forensic accounting, financial statement fraud

Corresponding Author: Dr. Ashish Saxena1 Asst.Prof. (Orcid ID: 0000-0001-8661-932X), Sharda School of Business Studies, Sharda university
Delhi NCR, India How to cite this article: Saxena Ashish., Shaikh Akhtar Zubia., Verma Manish (2024). Unveiling the Global and Indian Landscape of Fraud:
Investigating Financial, Geopolitical, and Ecological Consequences and Countermeasures, Commerce Research Review 1(2) 95-103.
DOI: https://doi.org/10.21844/crr.v102.1115
Source of support: Nil
Conflict of Interest: None
Received:27-04-2024 Accepted:04-07-2024 Published:30-07-2024

Introduction

The current worldwide situation has been marked by considerable disruptions and crises affecting
different realms like finance, geopolitics, or ecology. These events had a crucial effect not only on
business development but also on the rise of corporate fraudulence acts' exposure exemplified by Xerox's
scandalous behaviour along with those involving WorldCom or Enron. Such fraudulent activities are
presently emerging as a paramount problem negatively impacting individual entrepreneurs to state-level
economies alike. According to Wan and Said. (2019) the increasing power and influence of corporations
has led to the emergence of corporate financial crime, which negatively impacts society, the economy,
and the environment. This widespread occurrence highlights the dark side of these organizations and their
harmful actions.
As per The Institute of Internal Auditors fraud is the term used to describe any illegal action that involves
deception, concealment, or a breach of trust. According to The Association of Certified Fraud Examiners
(ACFE) Any deliberate or intentional action aimed at unlawfully obtaining property or money from
another person through deceit, deception, or fraudulent methods is referred to as fraud. The term fraud
encompasses a wide range of illegal activities, but it's not the auditor's responsibility to make legal

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judgments regarding fraudulent behaviour. Instead, the auditor's focus is on identifying actions that could
cause significant errors in the financial statements, known as material misstatements.
As per The Institute of Internal Auditors fraud is the term used to describe any illegal action that involves
deception, concealment, or a breach of trust. According to The Association of Certified Fraud Examiners
(ACFE) Any deliberate or intentional action aimed at unlawfully obtaining property or money from
another person through deceit, deception, or fraudulent methods is referred to as fraud. The term fraud
encompasses a wide range of illegal activities, but it's not the auditor's responsibility to make legal
judgments regarding fraudulent behaviour. Instead, the auditor's focus is on identifying actions that could
cause significant errors in the financial statements, known as material misstatements.
The act that involves dishonest means whereby others lose their property or money because someone has
breached trust concealed facts or misled intentionally with a goal for personal gain is commonly known
as fraud. According the definitions from both the Institute of Internal Auditors (IIA) as well as from The
Association for Certified Fraud Examiners (ACFE). This is what is meant by Fraud.
When scrutinizing through statements related to figures auditors who follow protocols like International
Standards on Auditing(ISAs) or Generally accepted auditing standards(GASS) have an obligation assess
potential fraud by considering all possibilities which may arise within them. Material misstatements in
accounting records are one result that may arise due to fraudulent financial reporting or asset
misappropriation by those carrying out fraudulent activities. And this is why audits are so important.
When evaluating fraud, auditors consider two categories of inaccuracies: misstatements that emerge from
deceptive financial reporting and misstatements that arise from the wrongful appropriation of assets.
Misstatements that occur due to deceptive financial reporting entail intentional manipulation, fabrication,
or alteration of accounting data or supporting documentation used to make financial report. This involves
the wilful misapplication of accounting rules as well as the intentional misrepresentation or omission of
material information in financial statements.
As per the study of Fadilah S et al. (2019) Knowing how fraudulent activities take place entails having
not only vast experience on accounting methods but also extensive knowledge on the investigative process
supported by legal background elements while taking into eminence psychological perspectives too.
Business firms facing security challenges can benefit from adopting forensic accountancy initially to
address the pitfalls traditional audits present. Combining focuses ranging from accountancy mechanisms
through thorough investigations to expert understanding of consequent legal ramifications fosters
professional collaboration which significantly improves chances of detecting incidences or even
preventing them entirely.
According to the study of Hashim et al. (2020) The 'triangle of fraud' represents a set of underlying
contributors that together can lead to deceptive practices occurring: incentives or pressure; opportunities;
and rationalization. These elements don't exist in isolation but interact with each other in various ways.
Together they create an environment where unethical behaviour thrives without early detection until it is
too late for consequence management actions to mitigate damages effectively. Importantly, people who
perceive low probabilities for being caught have greater temptations towards engaging in activities
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motivated by greed or self-interest rather than ethical considerations (ACFE 2020).As per Kagias et al. (
2022) The International Standards on Audit (ISA 240) has incorporated the fraud triangle, composed of
the incentive, opportunity, and rationalization elements. It enables us to comprehend the mechanics that
lead to fraudulent activities better. Although audits mainly analyse the negative effects of fraud on
financial statements, this framework brings a more comprehensive approach when assessing factors that
contribute to such acts. ISA 240 defines fraud as any case including motivations or pressures, an
opportunity perceived by individuals to commit deceitful actions, and rationalizations or justifications for
engaging in fraudulent conducts.
Financial fraud poses serious consequences for both the global and Indian economies. The Indian
economy has experienced a significant surge in fraudulent activities, with billions of rupees involved in
reported cases. According to Mohammed et al . (2020) Detecting financial fraud, especially in the form
of financial statement fraud, is challenging due to the clever concealment tactics employed by
perpetrators, often within the management itself. Such fraudulent activities undermine the integrity and
transparency of financial reporting processes, jeopardizing stakeholder trust and market confidence.
According to Nasir et al. There are numerous factors that are predominantly associated with the conviction
of firms for fraudulent financial reporting. Among these include the sluggishness in revealing pertinent
information. Instances of non-disclosure of significant information and the deliberate concoction of
accounting details.
Koornhof, and Plessis (2000). Companies should remain vigilant for any warning sign that could suggest
fraudulent activity by management. Examples of such red flags include favourable circumstances,
unexpected incidents, environmental stressors and tempting opportunities. Management involvement in
illicit acts such as financial statement fraud can have severe consequences for all parties affected. Timely
detection and intervention are thus essential measures companies need to take against this unlawful
behaviour phenomenon at the earliest indication of red flags like these mentioned above.
As per Samili, Arroyo and Issa, (2022) Financial statement fraud carries severe consequences for
organizations, shareholders, and stakeholders, including reputation damage, legal repercussions, and an
increased risk of bankruptcy. As per Handoko and Prastiwi , (2022).Companies with a strong ethical
culture and a focus on corporate social responsibility are less likely to engage in intentional financial
statement fraud, emphasizing the importance of ethical practices and transparency in mitigating fraudulent
activities.
Addressing financial fraud requires the utilization of advanced technologies and specialized techniques.
According to Achim, Bolea and Vaidean , (2021) Probabilistic graphical models, genetic algorithms, and
social network analysis have demonstrated effectiveness in detecting financial fraud and enhancing the
investigative process. The field of forensic accounting plays a pivotal role in identifying, preventing, and
addressing fraudulent activities. Akinbowale, Klingelhofer, and Zerihun.(2022). Forensic accountants
leverage their expertise in accounting, auditing, investigation, and legal procedures to gather substantial
evidence for legal proceedings, investigations, and overall pursuit of justice.

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Navarrete and Gallego (2023, quoted by Simeon, 2018) Instances of scandal have revealed the limited
ability of both internal and external auditing methods to prevent fraud or identify misrepresentation
prevalent within businesses today. To address this issue with greater efficiency, many are turning to
forensic accounting instead. Proven through previous successes at uncovering fraudulent activity far
outstripping that of traditional audit strategies.
According to Al-Daoud et al. (2022) The struggle against fraud and misrepresentation within business
entities has been extensive as of late due to numerous scandals that have taken place. Although internal
and external audits exist, they face limitations in preventing and identifying such issues adequately. As an
alternative method, the integration of various professional disciplines into a cohesive framework through
forensic accounting has emerged successfully in addressing these challenges.
Within this research project lies an investigation into both global levels as well as those specific to India;
we wish to uncover the wide-ranging consequences that result from instances of fraudulent activity such
as falsified statements or tampering with vouchers. By assessing multiple types of fraudulent behaviour
we hope to better understand how these actions can have enduring negative impacts that affect individuals,
business entities as well as economies at large. We thus intend on turning our findings towards measures
that aim at reducing opportunities for such behaviour through promotion transparency, fiscal
responsibility, and building trust within economic frameworks.
Further, fraudulent activities have had significant financial, geopolitical, and ecological consequences,
impacting individuals, businesses, and nations on a global scale. By examining specific cases, we can gain
a deeper understanding of the magnitude and implications of fraud in different contexts.
The repercussions from the Enron scandal were enormous- it rocked many people's confidence within
corporate governance mechanisms at a fundamental level. This once-proud energy company
headquartered stateside sought bankruptcy protection when it came to light that executives had concealed
debts while inflating revenues via fraudulent accounting techniques, misdirect investors who later suffered
significant financial losses running into billions- triggering staff reductions in masse as well.
One cannot discuss investment scam cases without mentioning the Bernie Madoff Ponzi scheme - which
happened to be one of the most publicized ones yet. A former chairman at NASDAQ stock exchange.
Bernie Madoff devised what went on to become one of history’s biggest and most notorious frauds ever
committed in relation to investments. By alluring them with consistently high returns that they could
expect from their investment with him for several decades he defrauded investors out of literally billions
in total worth during that period alone - a classic case of Ponzi scheme at play here where new investor
funds are simply used to pay off older investor shares as returns when they are due. Outcomes following
its collapse in 2008 were nothing short of catastrophic for affected investors. He was rightly convicted
and sentenced to 150 years in prison for his actions.
In India, the Nirav Modi-PNB fraud case captured significant attention and highlighted vulnerabilities in
the banking sector. Nirav Modi, a diamond jeweller, and his associates defrauded Punjab National Bank
(PNB) of approximately $2 billion through fraudulent issuance of Letters of Undertaking (LoUs). The
case exposed weaknesses in the banking system, including inadequate internal controls and collusion
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between officials and fraudsters. The impact of the fraud reverberated through the Indian banking sector,
leading to increased scrutiny, regulatory reforms, and a focus on strengthening governance and risk
management practices.
These real-life examples demonstrate the far-reaching consequences of fraud. In addition to financial
implications, fraud can have geopolitical effects. When corporate fraud occurs on a large scale, it can
undermine confidence in financial markets, affect investor sentiments, and have wider implications for
national economies. The Enron scandal, for instance, led to significant regulatory changes in the United
States and fuelled discussions on corporate governance reform globally. Additionally, misconduct poses
potential harm towards the environment's welfare. Presently there's escalated significance attached to
assessing companies based on Environmental, Social & Governance (ESG) considerations with
respectability for sustainability measures & ethical dispositions evolving higher prominence each passing
day. Deceitful strategies such as greenwashing involve false or misleading claims relating to
environmental policies by companies in order to gain support among investors or the public. This leads
to dire consequences towards the ecosystem and poses a setback for resolving ongoing climate change
issues, while concurrently disrupting wholesome corporate conduct principles.
To combat fraud effectively, various countermeasures and strategies have been implemented. These
include strengthening regulatory frameworks, enhancing corporate governance practices, promoting
transparency and accountability, and investing in advanced technologies and analytical tools for fraud
detection and prevention. Additionally, promoting a strong ethical culture within organizations and
fostering a robust risk management framework can help mitigate the risk of fraud. Hence it can be said
that fraud has wide-ranging consequences on financial, geopolitical, and ecological landscapes. Real-life
examples like the Enron scandal, the Bernie Madoff Ponzi scheme, and the Nirav Modi-PNB fraud case
provide insights into the magnitude and impact of fraud on individuals, businesses, and economies. To
mitigate fraud risks, it is essential to implement comprehensive countermeasures, improve corporate
governance, and foster transparency and accountability in financial systems.

Research Methodology

The present study is descriptive in nature. Through systematic literature review the researcher tries to
explore the critical gap in the practice of forensic accounting and to understand the meaning of financial
statement fraud and actions to be taken in order to make forensic accounting practices effective.

Research Problem

RQ1: What are the critical gaps in the practice of forensic accounting, particularly in relation to detecting
and preventing financial statement fraud?
RQ2: How can the clear meaning and understanding of financial statement fraud be enhanced to facilitate
more effective forensic accounting practices?
By combining the three initial research problems, the redefined research problems address the important
aspects of forensic accounting, specifically focusing on the gaps in its practice and the understanding of

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financial statement fraud. The first research problem emphasizes identifying the most significant gaps in
forensic accounting to enhance its effectiveness in detecting and preventing financial statement fraud. The
second research problem seeks to explore ways to improve the understanding and clarity of financial
statement fraud, which will contribute to more accurate and efficient forensic accounting practices.

Results and Discussion

Based on the findings from the survey conducted in report 1 and the analysis of real-life fraud cases in
report 2, the following solutions is proposed to address the research problems:
For RQ1: What are the critical gaps in the practice of forensic accounting, particularly in relation to
detecting and preventing financial statement fraud?
Establishment of specific qualifications and standards for forensic accountants and auditors: The absence
of specific qualifications was identified as a significant gap in forensic accounting practice. To address
this, it is essential to define minimum educational requirements, such as a Master's degree in commerce
or finance, to ensure expertise and competency in the field.
Enhance professional development and training: Regular training and professional development programs
should be implemented to keep forensic accountants updated on evolving fraud techniques and
investigative methodologies. This will help them stay proficient in detecting and preventing financial
statement fraud.

Clarify the roles and responsibilities of forensic auditors: Overlapping responsibilities between internal
auditors and forensic auditors can hinder the effectiveness of fraud detection. Clearly defining the roles
and responsibilities of forensic auditors within an organization will help streamline processes and avoid
potential gaps or conflicts.

For RQ2: How can the clear meaning and understanding of financial statement fraud be enhanced to
facilitate more effective forensic accounting practices?

Refine the definition of financial statement fraud: While a majority of respondents had a basic
understanding of financial statement crime, there was some uncertainty and room for improvement in the
definition's clarity and comprehensiveness. Collaborative efforts between academia, industry
professionals, and regulatory bodies should be undertaken to develop a standardized and clear definition
of financial statement fraud.

Promote awareness and education: Enhancing the understanding of financial statement fraud among
professionals and stakeholders is crucial. Awareness programs, training sessions, and educational
campaigns should be conducted to provide clear guidance on identifying, reporting, and combating
financial statement fraud.

By addressing these solutions, the practice of forensic accounting can be strengthened to detect and
prevent financial statement fraud effectively. Establish definitions amplifications, providing continuous
professional development, clarifying roles, refining definitions, and promoting awareness will contribute

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to more robust forensic accounting practices and mitigate the risks associated with fraudulent activities in
financial reporting.

Conclusions

The practice of forensic accounting and the understanding of financial statement fraud is crucial for
improving fraud detection and prevention. By establishing specific qualifications and standards for
forensic accountants, enhancing professional development and training programs, and clarifying roles and
responsibilities, the gaps in forensic accounting practice can be effectively addressed. Furthermore,
refining the definition of financial statement fraud, promoting awareness and education, and fostering
collaborative efforts will enhance the understanding and clarity of financial statement fraud. Implementing
these solutions will strengthen forensic accounting practices and contribute to more accurate and efficient
detection and prevention of financial statement fraud. Overall, these efforts will enhance transparency,
accountability, and trust in financial systems, safeguarding economies and promoting ethical practices.

Scope for Future Research

The current study paves a path for further research possibilities in the area of financial frauds and their
detection. The further research directions can enable development of a model to minimize such fraudulent
activities which will benefit various stakeholders like government entities, investors, shareholders thus
providing a multidimensional approach.

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