Corporate Sustainability with Forensic Auditing: An Evidence from India

Abstract

The repercussions of fraud are huge and sufferers are many. An organisation's very existence and sustainability of an organisation is threatened by frauds, which remain unchecked due to weak corporate governance norms and inadequacy of audit function in detection of financial statement frauds. This culminates in the closure of the entity at the cost of the interests of various stakeholders. Forensic accounting and auditing not only help detect fraud but can also prevent fraud by strengthening the corporate governance practices in an organisation. ABG Shipyard Ltd., belonging to one of the oldest and most prestigious ABG groups in India, building warships and other vessels for the Indian Navy, was once considered to be the largest private shipping yard. The Global Financial Crisis hit the company in 2008, and the consequent failure to repay the loans led to the corporate failure and liquidation. The fraud at the company was detected through a forensic audit at the State Bank of India’s behest in 2019 and the Central Bureau of Investigation (CBI) was able to register the case by 2022. This study tries to understand what went wrong and how, by analysing the annual reports, audit reports and financial statements and computing of Beneish M-score and Altman Z-score. The study finds that the erring auditors, self-dealing promoters and faulty management are the root causes of this fraud.