The Pros And Cons Of Fraud

986 Words4 Pages
FRAUD Fraud encompasses a wide range of irregularities and illegal acts characterized by intentional deception or misrepresentation. The Institute of Internal Auditors’ (IIA’s) IPPF defines fraud as any illegal act characterized by deceit, concealment, or violation of trust. These acts are not dependent upon the threat of violence or physical force. Frauds are perpetrated by parties and organizations to obtain money, property, or services; to avoid payment or loss of services; or to secure personal or business advantage. Fraud, according to Adeniji (2004:354) and ICAN (2006:206), is an intentional act by one or more individuals among management, employees or third parties, which results in a misrepresentation of financial statements. Fraud…show more content…
Bernard Ebbers the former chairman of WorldCom was recently jailed for 25 years for orchestrating a $US11 billion financial statement fraud (Belson 2005). Although larger businesses are more likely to experience economic crime, fraud may be more costly for small businesses (Thomas and Gibson, 2003). However, the small businesses are more likely to be affected by its impacts, given the fact that they operate on a small scale where finance is scarce. Collateral damage may include harm to external business relationships, employee morale, firm reputation, and branding (PriceWaterhouseCoopers (PWC), 2003). Thus, firms would try to get rid of the risks of fraud. However, due to the nature of different frauds, each type of fraud needs to be dealt accordingly rather than just implementing what is already present. The failure of internal auditing system to prevent such malpractice has led to the use a more effective system known as the forensic…show more content…
The forensic accounting has therefore been introduced to prevent such malpractices and as stated by Bhasin (2007), the accountants are required to have adequate skills beyond the numerical
Open Document