Why Fraud Happens
Fraud prevention is one of the most important areas of operation for an organization that has a heavy volume of cash dealings as a part of its business. If there is no robust fraud detection and prevention strategy in place, the organization will be exposed to severe cash crises at regular intervals and this may ultimately lead to a permanent closure or shut down. Fraud needs not necessarily happen within the organizations books of accounts. There are many avenues open through which regular fraud can take place. Accepting money or favors from competitors, vendors or customers with intent to do injustice to the organization or make it vulnerable to operational hazards is also a crime.
Apart from the auditors, there are many other agencies that can detect fraudulent activities in an organization. Shareholders of the company, who take a keen interest in the operation of the organization, also come to learn about these illegal activities and have every right to express their concern in front of the company management. The general public can also file a suit in the courts of law if they have reasons to believe that fraudulent activities are taking place in the company. This shows that it is not just the management of the company or someone entrusted with the financial reporting of the company that has the right to question fraudulent activities.
A question has been raised many a times as to why fraud happens. What is it that instigates a fraud to take place? It must be borne in mind that a fraud is not the direct outcome of the actions of one of the parties involved in the crime. For a crime of this nature to be committed, there has to be necessarily at least two persons – one who is the giver of the money and the other who is the receiver.
A fraud is committed to achieve some personal objectives which are otherwise not achievable. For example a person wants to buy an automobile and does not have the means to do so. He takes the recourse to perform a series of fraudulent activities that help him in collecting the funds needed for the purpose of buying the car. But to do these illegal activities, it is first necessary to convince the other person who would give him the money that this would benefit the other person as well. Only when the giver of the money agrees to the benefits involved in the transaction and acts accordingly it can be said that a fraud has been committed.
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- Fraud Leads to Destruction
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- Understanding Corporate Fraud
- Credit Card Fraud