From the ACFE (Association of Certified Fraud Examiners)
Fraud includes any intentional or deliberate act to deprive another of property or money by guile, deception, or other unfair means.
Fraud against a company can be committed internally (also called occupational fraud) by employees, managers, officers, or owners of the company, and can be defined as “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the organization’s resources or assets.”
Fraud can also be committed externally by vendors (bid-rigging schemes or billing for goods or services not provided), customers (bad checks or falsified account information for payment), and additional threats of security breaches, thefts of intellectual property or proprietary information perpetrated by unknown third parties and hacking, to name a few.
Why does Fraud Occur? The most widely accepted model for explaining why people commit fraud is the fraud triangle, a combination of Financial Pressure, Rationalization and Opportunity.
Two things you can do to help prevent fraud are to be aware of the behavioral red flags of fraud, and to look for internal control weaknesses in your area of responsibility.
Key warning signs (behavioral red flags) are: Living beyond means, Financial difficulties, Unusually close association with vendor/customer, Control issues/unwillingness to share duties, Irritability/suspiciousness/defensiveness, “Wheeler-dealer” attitude and Divorce/family problems. 85% of all fraudsters displayed at least one behavioral red flag while committing their crimes.
Key internal control weaknesses are: Lack of internal controls, Ability to override controls, Lack of management review, Poor tone at the top, Lack of competent personnel in oversight roles and Lack of employee fraud education.
Unfortunately, fraud happens everywhere, see the below for examples of fraud in Healthcare.
