CORPORATE SUSTAINABILITY WITH FORENSIC ACCOUNTING AND AUDITING
Abstract
The purpose of this paper is to analyse the recent fraud case of ABG Shipyard Ltd. which outnumbered all the previous cases of frauds in India in magnitude and impact. The company belongs to one of the oldest and very prestigious ABG group and was once considered to be the largest private shipping yard. It had received license from the government to build warships and other vessels for Indian Navy. This study is the first attempt to analyse why a healthy and highly prosperous company went into liquidation and was hit by the fraud. To analyse the reasons of fraud at ABG Shipyard Ltd., both the quantitative and qualitative tools have been made use of. The content analysis of the annual financial reports and audit reports of the company has been done for a period of seven years, from 2009-10 to 2015-16, along with the various news articles about the fraud. Z-Scores have also been computed using the financial data of nine years, from 2007-08 to 2015-16 to assess whether the information contained in the financial statements was already indicating the risk of bankruptcy of the company. M-Scores are also calculated to hint any possibilities of earnings manipulation in the financial statements. The study finds that the erring auditors, tunnelling, self-dealing promoters and faulty management are the root causes of this fraud. Given that the regular auditing has continuously been proved ineffective in fraud detection, progressive use of forensic accounting and auditing is advised to detect and prevent frauds.
Keyword : Forensic accounting and auditing, Corporate sustainability, Beneish M- score, Altman Z-score, erring auditors, tunnelling, self-dealing promoters
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