Types of Fraud

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Types of Fraud

What is a Financial Fraud

Fraud is special phenomenon is our society; it is a type of crime in business whereby the personal qualities of an entrepreneur are focused on deception and self-justification of deception and business ethics is reduced to the behavior of the initiating cheating partner or competitor.

In terms on accounting, fraud is generally reporting deceptive financial statements to mislead the behavior of the users of financial statements. False financial statement is the form of inflated earnings is the most commonly used means. A company manager from the grassroots to senior managers, are likely to be involved in the fraudulent activities of the financial statements; Certified Public Accountants and CPAs are the main participants of fraudulent financial statements to bear the corresponding legal responsibility (Vandyck, 2006).

Different Types of Fraud

Employee Embezzlement

Embezzlement is a term that has to do with the mismanagement or misappropriation of funds. This misappropriation can result in payments by customers, abuse of resources available to complete a project, or even the use of corporate funds for personal use. Many forms of embezzlement are illegal and punishable by law. One of the most common forms of embezzlement is misappropriation. In this scenario, an employee with access to company funds and chooses to steal the funds, while taking measures to prevent the theft to be discovered. The process can lead to changes in the accounting records or the submission of expense reports for expenses that were not actually incurred.

Vendor Fraud

Vendor fraud refer to a broad range of scams, form establishing fraudulent or fake enterprises and causes customers to pay money for payment, to trusted supplier or stakeholders who make fake invoices and bills to charge more than the actual amount. Vendor frauds are usually specified to accounts payable because where there the money is. However, vendor fraud may also be an organization's internal affair to improve its rating.

Customer Fraud

Fraud in the consumer finance operations are initiated in applications for loans, using counterfeit identification documents and documents of solvency. The key to good fraud prevention is to prevent deception in the operational phase of the credit, by any document forgery.

Management fraud or financial statement fraud

The financial statement fraud is the intentional publication of false information in any part of a financial statement. Such frauds are usually devised by high level management to portray a strong financial position of the country and attract investors. There are five categories of financial statement fraud; Notional income, Difference in time of revenue recognition, Strategies to hide liabilities and expenses, Insufficient or improper disclosure, and Improper asset valuation.

Investment Fraud

Investment fraud refers to fallacious investment plans with intent to collect money from different investor and latter default on their return. Such frauds are commonly backed by online, B2B or B2C organizations, where there is no physical existence and the website can create an impression of a well established lucrative firm. There are many types of investment frauds; like Telemarketing, Ponzi scheme, Nigerian Scam and other internet ...