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The document discusses various fraud cases in India including IL&FS fraud, Satyam scam, Yes Bank-DHFL case, and Saradha chit fund scam. It provides details on how each fraud took place, the companies involved, effects of the fraud, and actions taken in response such as audits, arrests, and changes to company ownership. It also defines fraud and forensic audits under Indian law and the process and methodology used in forensic audits.

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Ankit Gupta
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12 views

TESTCHECK

The document discusses various fraud cases in India including IL&FS fraud, Satyam scam, Yes Bank-DHFL case, and Saradha chit fund scam. It provides details on how each fraud took place, the companies involved, effects of the fraud, and actions taken in response such as audits, arrests, and changes to company ownership. It also defines fraud and forensic audits under Indian law and the process and methodology used in forensic audits.

Uploaded by

Ankit Gupta
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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RECENT FRAUDS AND

FORENSIC AUDITS
Section 17. of the Indian Contract Act,1872
Defines "Fraud" as

"Fraud" means and includes any of the following acts committed by a party to a contract, or
with his connivance, or by his agent1 , with intent to deceive another party thereto of his
agent, or to induce him to enter into the contract:—

(1)the suggestion, as a fact, of that which is not true, by one who does not believe it to be
true;

(2) the active concealment of a fact by one having knowledge or belief of the fact;

(3) a promise made without any intention of performing it;

(4) any other act fitted to deceive;

(5) any such act or omission as the law specially declares to be fraudulent.
IL & FS FRAUD
ABOUT THE COMPANY

• Incorporated in 1987 as a Core Investment Company registered with the RBI


• Initial business was to finance infrastructure projects
• Finances and executes infrastructure projects via the “Public Private Partnership”

model.

DEFAULTS

• The group defaults on a Rs 1,000 crore term loan and its subsidiary defaults
on dues worth Rs 500 crore owed to SIDBI.
• Several short-term loan defaults take place, totaling Rs 440.46 crore Ratings
• ICRA, CARE and Brickwork agencies downgrade conglomerate's rating to 'default’
ACTIONS

• Alongside, the Reserve Bank of India (RBI) initiates a special audit


• Constitution of new board under the chairmanship of Uday Kotak and five other new
board members.
• In October 2018, Arpwood Capital and J M Financial were appointed as transaction
advisors and Alvarez & Marsal was roped in to develop a resolution plan.
• SFIO takes its former vice-chairman Mr. Hari Sankaran into custody in April 2019
• Deloitte faces SFIO probe
• SFIO arrests chief Ramesh Bawa for irregularities in sanctions and disbursement of
loans
• 53,000 crore of bank loan to IL&Fs are classified as NPA.
SATYAM SCAM
ABOUT THE COMPANY

• Established in 1987 by the Ramalinga Raju, CEO and founder


• Listed on the BSE in 1991

HOW THE FRAUD TOOK PLACE ?


• Employed their own ERP system to account for fictitious receipts
• Much of this was invested in property
• In late 2008, the property market dwindled
• The scandal was brought to light in 2009
• Chairman Byrraju Ramalinga Raju confessed that the company's accounts had been
falsified.
• manipulated the accounts of ₹ 7,000 crores in several forms.
AFTER EFFECTS
• Share prices fell to Rs 11.50 on 10 January 2009 compared to a high of Rs 544 in
2008.
• In February 2009, the CBI took charge of the investigation.
• Public company was then removed from the Nifty and the Sensex.
• Tech Mahindra then bought the company and gave it a new identity.
•
AUDITORS
This company ceased operations in 2013 and merged into its parent Tech Mahindra

• PWC affiliates served as independent auditors of Satyam Computer Services.


• Indian arm of PwC was fined $6 million by the SEC.
• SEBI barred Price Waterhouse from auditing any listed company in India for 2 years.
• SEBI also ordered disgorgement of over Rs 13 crore wrongful gains from the firm and 2
YES BANK-
DHFL CASE
DHFL : PIRAMAL CAPITAL AND
YES BANK
• FOUNDED : 2004 HOUSING FINANCE LIMITED
• TRADED AT: BSE AND NSE
• Products : • Earlier known as Dewan Housing
i. Credit cards • Finance Corporation Ltd.
ii. Consumer banking • Founded : 11th April, 1984
Iii. Corporate banking • Traded at : BSE and NSE
iv. Finance and insurance • Products:
v. Mortgage loans i. Home Loan
vi. Private banking ii. Non-Housing Loans
vii. Wealth management iii. Deposits
viii. Investment banking
DHFL CASE
• DHFL started with vision of giving houses to lower income peoplein semi urban and
rural area people
• DHFL runs away wih 34000 Cr Indian Rupees
• Account hoders unable to withdraw cash
• Strong relation between bank top officials and Wadhwan family
• May 2019- DHFLdefaults loan interest payment
• Cases filled against the compnies by depositers
• Kapil Wadhwan, Dheeraj Wadhwan involved along with third major involvement being
political support
• KPMG report- amout of 14000 cr transferred to 66 different companies
• 25 of the above companies do not have any address or revenue
• All the amounts indirectly went to shell companies and finally to promoter’s
pockets.
SARADHA CHIT FUND SCAM
BRIEF INTRODUCTION ABOUT SARADHA
SCAM
• The Saradha Group financial scandal was a major political scandal caused by the collapse of
a Ponzi scheme run by Saradha Group, a consortium of over 200 private companies that was
believed to be running collective investment schemes popularly but incorrectly referred to as chit
funds in Eastern India.

• The group collected around ₹200 to 300 billion (US$4–6 billion) from over 1.7 million
depositors before it collapsed in April 2013. In the aftermath of the scandal, the State
Government of West Bengall where the Saradha Group and most of its investors were based
instituted an inquiry commission to investigate the collapse. The State government also set up a
fund of ₹5 billion (US$63 million) to ensure that low-income investors were not bankrupted.
SARADHA CASE
• Raises funds by issuing redeemable bonds and debentures.

• Persuaded the investors with assurance of fixed rates of returns

• Sen hired agents to gain investments by giving them high rates of commission.

• 25 din mein paisa double.

• Over INR 4000 crores raised from 17 lakh people.

• Almost 300 companies were created under Sharadha group.

• Investors added under those 300 to misguide SEBI.

• Fund inflow reduces and complaints filed as returns not given.

• Actors and TMC MP’s found associated with the group.

• Almost 200 peole committed suicide.


PUNISHMENT FOR FRAUD U/S 447 OF
CO ACT,2013
SEC 143(12) OF CO ACT ,2013

The Companies Act, 2013 had introduced Section 143(12) which requires the statutory auditors of
companies to report to the Central Government about fraud/suspected fraud committed against
the company by officers or employees of the company.

11G OF CO ACT ,2013


Companies (Audit and Auditors) Amendment Rules, 2021 introduced new reporting requirements

for auditors under Rule 11 of the Companies (Audit and Auditors) Rules, 2014. Among the new

rules is Rule 11(g), which mandates auditors to report on the use of accounting software that

maintains an audit trail. This new rule is significant as it ensures that the books of accounts

maintained by companies are accurate and reliable, and the financial reporting process is more

transparent.
FORENSIC AUDIT
FORENSIC AUDIT
FORMAL DEFINITION
A forensic audit is a structured examination of the financial records of a business entity in an
investigative manner to find out the evidence that can be used for legal proceedings in court. Unlike
financial audits which are focused more on statutory compliance, the forensic audits are designed to
investigate the financial records of an entity to derive evidences in support of fraud that can be used in
court of law or legal proceedings.
WHY?

WHEN?

BY
WHOM?
METHODOLOGY OF FORENSIC AUDIT
ST • INFORMATION AVAILABLE ON PUBLIC DOMAIN
AG
E 1

ST • INFORMATION PROVIDED BY BANK


AG
E 2

ST • INFORMATION PROVIDED BY COMPANY’S MGT


AG
E 3

ST • INFORMATION GATHERED DURING PLANT VISIT


AG
E 4

ST • INTERACTION WITH SUPPLIERS & STAKEHOLDERS.


AG
E 5
PROCESS OF FORENSIC AUDIT
SCOPE OF FORENSIC AUDIT
BANK FORENSIC AUDIT

IN INSOLVENCY CASES

ELECTRONIC OFFENSES WINGS

SFIO(SERIOUS FRAUD
INVESTIGATION OFFICE)
SEBI(SECURITIES EXCHANGE BOARD OF
INDIA)
OPPORTUNITIES FOR FRESHERS

RECRUITING BY CORPORATES AND BANKS

SECTION 49,50,55 AND 62 OF INSOLVENCY AND


BANKRUPTCY CODE.

REGULATORY EMPANELMENT
THANK YOU

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