Fraud Definitions

There are many definitions of fraud to be found in the anti-fraud laws and regulations of countries around the world. It is important to be clear right at the start that these legal definitions must always be referred to and followed when conducting fraud investigations. We will look at some of them at the end of this Chapter. However, legal definitions are not the most helpful sources when looking to put together a consistent framework that will enable directors and managers to deal with threats of internal fraud in business in the most effective way.

Whenever I work on training courses or speak at conferences I prefer to refer my delegates to a definition with a more worldwide application. As a chartered accountant I naturally look to what the international accounting and auditing standard setters have to say. In the case of fraud, the auditing standards both in the US and internationally provide very comprehensive and helpful definitions. I normally use the definition contained in International Standards on Auditing No.240: The Auditor's Responsibility to Consider Fraud in an Audit of Financial Statements (“ISA 240”),2 although the definition in the Statement on Auditing Standards No.99: Consideration of Fraud in a Financial Statement Audit (“SAS 99”)3 in the US is very similar.

The ISA 240 definition of fraud is as follows:

An intentional act by one or more individuals among management, those charged with governance, employees or third parties involving the ...

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