Often “fraud” and “misconduct” is mentioned in the same sentence. Before we get to the key objectives of an effective anti-fraud strategy let us look at the most common definitions of each.
Definition of fraud:
Fraud is often defined as a misrepresentation properly relied upon by an individual to that person’s detriment or to the unfair advantage of the fraudster. For fraud perpetrated against individuals the above definition may be perfectly acceptable. However, for fraud committed by those in or against an organisation, this definition may not fit as well since it is often difficult or impossible to measure the loss inflicted or gain achieved.
Definition of misconduct:
Misconduct is a broad concept that generally refers to violations of law, regulation,
internal policy and expectations for ethical business conduct.
Examples of fraudulent activities or misconduct:
Some examples of fraudulent activities of misconduct are the following;
Fraudulent financial reporting (over/understatement of revenue, expenses, assets, etc.)
Misappropriation of assets (embezzlement, payroll fraud, theft, procurement fraud, etc.)
Revenue or assets gained by fraudulent or illegal acts (over-billing, accelerated revenue etc.)
Expenses or liabilities avoided by fraudulent or illegal acts (tax fraud, falsifying data, wage fraud, etc)
Expenses or liabilities incurred for fraudulent or illegal acts (bribery, kickbacks, etc.)
Other misconduct (conflicts of interest, insider trading, nepotism, theft of trade secrets, violation of laws and acts, etc.)