CFOs to be blamed for most of frauds, says SEBI Whole Time Member SK Mohanty
SEBI has identified CFOs as key contributors to most financial frauds in India
Chief financial officers are responsible for most of the frauds that have been witnessed in India, a senior official from SEBI said on Friday, citing an analysis done by the capital markets regulator. The role of the CFOs extends much beyond keeping accounts of the business, and Sebi looks at them as "critical gatekeepers for ensuring the integrity of the market", its Whole Time Member SK Mohanty said.
Chief Financial Officers (CFOs) have been identified as key players in the majority of financial frauds in India, according to a recent analysis by the Securities and Exchange Board of India (SEBI). This revelation sparks critical discussions on the responsibilities of CFOs and the necessity for more stringent regulations.
CFOs as "Critical Gatekeepers"
SEBI's Whole Time Member SK Mohanty revealed that CFOs bear significant responsibility for the frauds encountered in the country. He noted that the CFO's role is more expansive than merely maintaining the business accounts. SEBI views CFOs as "critical gatekeepers for ensuring the integrity of the market," emphasizing their key role in financial operations and oversight.
The Scope of the Fraud Problem
Mohanty further observed that many of the frauds could have been prevented if CFOs had acted as the first level of check to the activities of management. Alarmingly, the majority of these frauds occurred due to financial statement manipulations, an area under the purview of the CFOs.
Whether due to innocence, negligence, a lack of due diligence, or irresponsible functioning, it appears that CFOs have often faltered in their duties, leading to numerous scams.
SEBI's Response: A Dedicated Fraud Prevention Department
In response to this trend, SEBI has initiated a dedicated department to prevent frauds, harnessing talent from within the organization with chartered accountancy credentials. The regulator is also addressing related party transactions and valuations, areas in which it has been struggling to gain control.
The Importance of Accurate Disclosures
According to Mohanty, discrepancies in disclosing material events have been observed over the past few years. This inconsistency has led SEBI to release new guidelines on the subject, underscoring the importance of transparency and accurate disclosure in financial statements.
Key Takeaways
- SEBI has identified CFOs as key contributors to most financial frauds in India, suggesting a need for increased vigilance and responsibility in this role.
- Financial statement manipulations have been a common factor in these frauds, reinforcing the need for careful scrutiny of financial records.
- In response, SEBI has created a dedicated department to prevent frauds and issued new guidelines to ensure transparency in disclosures.
- The revelations underscore the importance of the CFO's role as a "critical gatekeeper" in maintaining market integrity, highlighting the necessity for stricter regulations and oversight.
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