Role of Forensic Accounting in the Prevention of Financial Shenanigans and Frauds in Cooperatives

As the resentment against corruption assumes unprecedented proportions, with un-elected heroes of civil society at the helm, it is also important to stock of corrupt practices in all form of businesses including the cooperative sectors of India. Most of the cooperative disasters commenced from ethical bankruptcy on the part of senior executives as they tend to show annual growth in business, caused by the infectious greed, brought in creative accounting and earnings management philosophy. The myopic profit-led approach as against value-led approach paved the way for the biggest bankruptcy! While most cooperative societies reporting their financial performance, some take advantage of grey areas in the rules in order to portray their bottom line in a misleadingly positive way. Management's desire to put a positive spin on financial results has been around as long as cooperatives and members themselves. Dishonest cooperatives have long used these tricks to prey on unsuspecting members and stakeholders, and it is unlikely that they will ever cease to do so. The lure of accounting gimmickry is particularly strong at cooperatives that are struggling to keep up with their members' – investors' expectations or their competitors' performance. And while most of the stakeholders have become savvier to these gimmicks over the years, dishonest management of cooperatives continue to find new tricks to fool the members – investors and all stakeholders at large. Modern organized cooperative frauds are sophisticated, and well-resourced by managers, treasurers, politicians and score of others. There is the need to respond to this changing criminal threat and skills of non-traditional investigators like accountants and legal experts are needed to combat the financial shenanigans. The failure of statutory audit to prevent and reduce misappropriation of cooperative funds and an increase in such crime has put pressure on the professional accountants and legal practitioners to find better ways for prevention of white collar crimes. This paper, intends to find out the spectrum of financial shenanigans and frauds in the cooperatives and how the knowledge of forensic accounting can reduce such frauds and mismanagement