Forty-five percent of the 1,000 managing directors, chief financial officers and other top executives of leading Indian businesses declared fraud had increased within their organisation, said the study, conducted every two years.

KPMG said 81 percent of respondents reported fraud involving financial statements was “a major issue”.

Some 63 percent blamed a desire to meet or exceed investor expectations as “the most significant reason” for issuing fraudulent financial statements.

“Remuneration linked to financial performance is also a driver for financial statement fraud,” Rohit Mahajan, executive director of KPMG’s forensic services, told AFP.

Corporate fraud has become an increasingly topical issue in India since leading outsourcer Satyam Computer stunned the country’s business world in 2009 with the admission that its profits had been overstated for years.

Satyam founder B. Ramalinga Raju declared he had inflated profits and jacked up the company’s balance sheet by more than one billion dollars in what was India’s biggest accounting fraud.

“Control mechanisms are not in place in most organisations and hence, the need for risk mitigating strategies is unquestionable,” the report said.

“It is time that India Inc. sits up and ends its tolerance of unethical behaviour, bribery and corruption.”

The report blamed weak internal control systems, eroding ethical values and a reluctance on the part of the line managers to take decisive action against the perpetrators “as the most vital underlying reasons” for rising fraud.

The survey said supply chain fraud — involving procurement, distribution and revenue leakage — was particularly vulnerable to fraud.

“Outsourcing, increase in the use of third parties and technology have combined to open up new avenues of frauds like e-crime and intellectual property theft,” it added.

The report comes as India’s benchmark share index rose Wednesday above the key 18,000 level for the first time in over two years, buoyed by expectations of a robust quarterly earnings season which begins April 13.

The 30-share Sensex hit a day’s high of 18,047.86 before retreating on profit-taking to close up 0.16 percent at 17,970.02 points.

India’s share market has been rising on heavy foreign fund inflows as investors bet on strong corporate returns.

Last year, Prime Minister Manmohan Singh warned that “pervasive corruption” was tarnishing India’s image and could discourage much-needed foreign investment.

“Being a fast-paced economy such as ours, fraud management is an extremely vital issue confronting us,” said KPMG’s Mahajan.

“Things are changing for good with respect to awareness of fraud — people have started talking about it — but there is a lot of work to be done to root it out,” he said.