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Fraud & Financial Impropriety

 

Definition

Black’s Law Dictionary defines fraud as:

“all multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprise, trick, cunning or dissembling, and any unfair way by which another is cheated.”

Financial fraud is one or more intentional acts designed to deceive other persons and cause them financial loss. Financial fraud and/or financial impropriety usually involves misappropriation of assets.

The principal categories of (financial) fraud are:

  • Misrepresentation of material facts
  • Concealment of material facts
  • Bribery
  • Conflicts of interest
  • Theft of money or property
  • Theft of trade secrets or intellectual property
  • Breach of fiduciary duty
  • Statutory offenses

Statistics & Recommendations

According to Ernst & Young (2002):

  • The estimated cost of fraud in North America exceeds $100 billion annually.
  • Approximately 85% of fraud against companies involves former or current employees, suppliers or customers.

According to the Association of Certified Fraud Examiners (2002 Report To The Nation):

  • Certified Fraud Examiners estimate that organizations lose approximately 6% of their revenue to occupational fraud and abuse.
  • Cash is the most frequently targeted asset.
  • The majority of occupational frauds are ongoing.
  • The most effective means of detecting occupational fraud is through tips and complaints.
  • An adequate system of controls is essential to preventing and detecting occupational fraud (e.g. segregation of incompatible duties and regular management reviews of transactions).

Where a suspected fraud or financial impropriety comes to the attention of the Internal Audit Department, a Special Review is launched to determine the existence and extent of any fraudulent activities. Members of the University community should inform their unit head and the Director of the Internal Audit Department if they suspect fraud.

Last updated: April 25, 2007