PPT – Fraud PowerPoint Presentation – ID_7030474 is money laundering fraud

Definition of fraud

• under IPC – a person is said to do a thing ‘fraudulently’ if he does that thing with an intent to defraud but not otherwise.

• defraud/fraud per se not defined under IPC. Section 415/420 defines cheating, dishonesty etc..But not fraud.

• fraud (in terms of contract) is defined in section 17 of indian contract act and makes the contract voidable at the option of other party.

• companies bill 2009/2011 contains a definition as under:

Fraud in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with his connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or other persons associated with the company, whether or not there is any wrongful gain or wrongful loss.Is money laundering fraud

• as per oxford dictionary – fraud is a wrongful or criminal deception intended to result in financial or personal gain



• manipulation, falsification or alteration of accounts.

• related party transactions

• diversion of funds

• non existent cash bank balances

• unrecorded liability

• inflated revenue

• misrepresentation or internal omission from financial statements.

• intentional misapplication of accounting principles relating to amounts, classification, presentation or disclosure.

• ASSETS MISAPPROPRIATION: ( inventories, fixed assets, cash)

• cheque tampering

• payroll frauds – ghost workers, excess payments, payments for leave

• reimbursements – submitting false bills for claims, duplicate payments, unauthorized disbursements

• assets inventory frauds – theft / embezzlement

• billing frauds – paying for goods / services not received, fictitious suppliers

is money laundering fraud


• kickbacks – incentives – commission – conflict of interest


• use of one’s occupation for personal enrichment through deliberate misuse or misapplication of the employing organizations resource of assets.

Risks owner of fraud

• why didn’t the auditors discover fraud? – this is first question asked by everyone when a fraud is discovered

• an audit is not a substitute for the management control and no guarantee is given or to be implied that an audit will necessarily disclose fraudulent misappropriation. {tonkwane sawmill co. Ltd. VsFilmatter 1975 (2) SA 453(W)}

• why couldn’t a properly planned and executed audit by an independent audit firm detect a fraud?

• fraud entails sophisticated procedure aimed to concealment. Auditor’s detection of fraud depends more on the expertise of the perpetrator than on the auditor’s knowledge and experience.Is money laundering fraud

• auditors should not be liable for tracking down ingenious and carefully laid schemes of fraud, when there is nothing to arouse their suspicion – international laboratories ltd v/s dewor (1933) DLR 665.

• auditor should be worried by factors that provide an incentive to commit fraud – paragraphs 48/49 of SAAS 240R.

• auditor has no statutory obligation to detect fraud. If a reasonably competent and cautious auditor could have detected a fraud, then the duty to detect fraud exists. Role of the auditor is to plan his audit so that there is a reasonable expectation of discovery.