Instances of financial irregularities, malpractices, and failure to adhere to corporate governance standards by startups have prompted institutional investors to ramp up due diligence, even before issuing the term-sheet, and insist on periodic financial reporting by portfolio companies.
Fearing frauds, auditors hire forensic investigators
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Synopsis
During the Covid pandemic and on and off lockdowns, auditors are finding it increasingly difficult to verify bank statements, third-party sales orders and other documents on which sales, profits and general health of a company is determined. With several regulators already coming down hard on audit firms, the fear is also that if they do not raise enough red flags, they could be stranded with a fraud situation.
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Industry trackers say in the last few months, investigators are being roped in more and more for audits.
Auditors are roping in forensic investigators to check authenticity of key documents, trail emails and also scrutinise certain inter-group overseas transactions as they suspect fraud, round tripping and other corporate governance issues spiked during the Covid-19 crisis.