Definition of Fraud

What is FRAUD?

ACFE (2008) defined fraud as “An array of irregularities and illegal acts characterized by intentional deception, perpetrated by individuals from inside or outside of an organization for their personal benefit or to benefit the organization”.

According to an article in the Legal Practitioner.Com website, titled “An Introduction to Corporate Regulation and Standardization” on Definition of Fraud, it was stated that basically there is no single accepted definition of fraud and it is impossible to provide a comprehensive definition of fraud as there are a lot of fraud definitions available in the dictionary.

According to the guidance on “Managing the Business Risk of Fraud: A Practical Guide” dated July 7, 2008 by three sponsoring organizations namely The Institute of Internal Auditors, The American Institute of Certified Public Accountants and Association of Certified Fraud Examiners, fraud can be defined as “… any intentional act or omission designed to deceive others and resulting in the victim suffering a loss and/or the perpetrator achieving a gain”.

According to the business dictionary website, fraud is an act or course of deception, an intentional concealment, omission, or perversion of truth, to (1) gain unlawful or unfair advantage, (2) induce another to part with some valuable item or surrender a legal right, or (3) inflict injury in some manner. Wilful fraud is a criminal offense which calls for severe penalties, and its prosecution and punishment (like that of a murder) is not bound by the statute of limitations. However incompetence or negligence in managing a business or even a reckless waste of firm's assets (by speculating on the stock market, for example) does not normally constitute a fraud. In such cases, the aggrieved party (creditors or stockholders/shareholders) must prove that at some point they were intentionally deceived on a material fact.