In Times Of Rapid Financial Growth, Fraudsters Take Advantage: Uday Gandhi

Uday Gandhi, an accredited chartered accountant and forensic auditor, delves into the realm of accounting and financial frauds in his newly launched book, "Accounting and Financial Frauds: The What, The How & The Why." In an exclusive conversation with BW Businessworld at the book launch, Gandhi, who is also the founder and Managing Partner of U.S. Gandhi & Co., spoke about his motivation behind writing the book, insights into prevalent financial fraud types, detection methodologies and real-life encounters with major financial scandals.

Can you tell us about the inspiration behind writing your book on accounting and financial frauds?

The inspiration behind writing this book on accounting and financial fraud stemmed from the absence of any published work on this subject in the market. There was a clear need for such a book as it wasn't readily available.

During the Covid period, as departments and agencies sought guidance, I began jotting down notes for them. Eventually, these notes accumulated into a comprehensive book on financial fraud and accounting practices.

Witnessing the significant impact of Covid, especially on cancer patients, I made the decision to write this book. The proceeds from the book will be donated to the Konark Cancer Foundation.

The scarcity of books on this topic in the market and the existing high prices motivated me to create a resource. Additionally, my aim to give back to society and support organised cancer patients drove this decision to contribute the book's proceeds to those suffering from cancer.

What are some of the most common types of accounting and financial frauds that individuals and organisations should be aware of?

The most common types of accounting and financial fraud encountered in individuals and organisations include various categories. With India's economy progressing and reaching trillion-dollar levels, frauds have also risen alongside this growth.

These types of fraud encompass banking fraud as the primary one, followed by corporate fraud within organisations, employee fraud and fraudulent activities affecting investors. The prevalence of these frauds affects the masses in India.

Numerous instances involve cheating investors. While the stock market may be on an upward trend, there's a simultaneous increase in fraudulent activities. In scenarios where there's exceptional and rapid growth, fraudsters often exploit the situation, taking advantage of the rising market. These are the primary types of fraud prevalent in such circumstances.

How can businesses detect and prevent accounting and financial frauds within their organisations?

I've recently completed my international degree in fraud, awarded by the Association of Fraud Examiners. This qualification has exposed me to various frauds occurring worldwide, enabling me to not only learn about them but also investigate them.

To reiterate your question, detecting fraud involves employing various techniques. Nowadays, there are numerous software tools available in the market designed for this purpose. These software applications track the money trail accurately.

Understanding the money trail is crucial. It reveals where the money has been spent and whether it has been used for legitimate business purposes or diverted for personal gains, such as acquiring personal assets. In cases of banking fraud, it helps determine if sanctioned loans were utilised as intended or misused for personal assets or siphoned out of the country.

Can you provide us with any real-life examples or case studies of accounting and financial frauds that you have come across during your research?

I have encountered various cases in my role as a mentor to the agency. In the case of a major fraud like the National Spot Exchange, I was the sole mentor guiding the department. The fraud amounted to Rs 6,500 crore.

Fortunately, I'm proud to say that every investor who had invested less than Rs 20 lakh in the scheme has been refunded their entire amount post-detection, thanks to the investigative techniques applied in this case. As of now, 80 per cent of the investors have received their money back.

An important aspect to note is that I have also been involved in cases like Kingfisher or the instances involving figures like Nirav Modi. Often, the government seeks my assistance to combat such frauds. I willingly offer my help because I believe in giving back to society what I've gained from it.