The IUP Journal of Accounting Research and Audit Practices:
Forensic Accounting and Its Applications: Evidence from the Indian Life Insurance Sector
Article Details
| Pub. Date | : Apr, 2020 |
|---|---|
| Product Name | : The IUP Journal of Accounting Research and Audit Practices |
| Product Type | : Article |
| Product Code | : IJARAP10420 |
| Author Name | : Joy Chakraborty, Arkaprabha Das, Ishani Roy |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 16 |
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Abstract
Though insurance fraud is a victimless fraud in India, the role of forensic accountants came into prominence in recent times due to rising instances of frauds and white-collar crimes in the country's insurance sector. It has been found that, on an average, 8.5% of the revenues generated from the country's life insurance sector are accounted to fraud loss every year. The first such instance of fraud in the country's life insurance sector was reported in the case of SBI Life, for violating the regulatory norms in safeguarding the policyholders' interest and maintenance of proper internal controls. In this context, the present study makes an attempt to investigate the possible anomalies in the operating expenses of SBI Life, covering a period of 10 years from 2011 to 2020. For this purpose, the application of Benford's Law, coupled with empirical analysis through chi-square, Z-test and mean absolute deviations, has been employed to check the conformity of the observed dataset in line with Benford's distribution. The study points out the necessity of investigation in case of a few leading digits showing higher deviations from Benford's distribution, thereby providing scope for further investigation of the observed dataset of SBI Life.
Description
The term 'forensic accounting' refers to financial fraud investigation which includes the analysis of accounting records to detect, investigate and prevent the recurrence of financial frauds and white-collar crimes. Forensic accounting in India has come to limelight in recent times due to rapid increase in frauds and scams in the country's financial sector with the belief that our law enforcement agencies do not have sufficient expertise to investigate such frauds. With India being ranked globally as the 88th most corrupt nation, the need for forensic accountants or fraud investigators becomes all the more profound. Moreover, growing financial frauds, stock market scams, failure of financial companies, phenomenon of vanishing companies and failure of the regulatory mechanisms would further instigate the rise of forensic accounting as an indispensable tool for investigation to uncover financial frauds and white-collar criminal activities.
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