Introduction:- My of article is based on only 3 words ‘Fraud’, ‘Fraudster’ and ‘Failure of system’, means what is fraud, who is fraudster and what is the loophole in our system because we are unable to detect the fraud in initial stage and financial impact of that fraud.
Fraud:-
• “Fraud refers to ant and all means a person uses to gain an unfair advantage over another person.”
Fraudulent acts include lies, suppression of truth, tricks and they often involve a violation of a trust or confidence.
Generally fraud is of two types:-
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Fraud |
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Manual Fraud |
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Computer Fraud |
Fraud
a. Manual Fraud: - This type of fraud can be committed by someone within an organization or by an external party. Major involvement is of internal employees, person connected with particular task; plan because they understand the system and its weakness.
The example of these frauds are-
1- In case of receivable declare above 3 years as unrecoverable and later on recovered by the party.
2- Fraud in case of Tender acceptance. (Acceptance of tender of those persons who provide money against the acceptance )
3- Payment to unknown parties.
4- Purchase of item in high value as compare to the market. (Accepting quotation higher than the market price.)
5- Distribution of items between own relatives in the name of others. (when these items are distributed free of cost or at concessional rate)
6- Payment of pension to persons in file who have already died earlier.
7- When the fund is received for particular purpose, check the number of loans and advances in a year to staff and others.
8- The debtors aging old debtors specially bad debts cases transferred to Profit and loss account and later on recovered the same from party to close the account.
B * Computer Frauds: - These frauds are
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Unauthorized theft, use, access, modification, copying and destruction of software.
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Theft of money by altering computer records or theft of computer time.
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Theft or destruction of computer hardware.
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Use of conspiracy to use computer resources to commit an offence.
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Intend to illegally obtain information or tangible property through the use of computer.
In my opinion manual fraud is more risky than computer fraud because conversion of fake records into legal records then making fraud by following all the procedure as per rules and regulation. Even a computer and person cannot detect these frauds unless and until they use their mind and analyze the situation and financial impact of money involve.
Fraudster:- These fraud perpetrator are often referred to as white color criminals. They may be internal or external to the organization.
Failure of system:- Here we define the system as, it means internal control, lack of knowledge about the work, access of few person in major task, money matter involved for handling the task to the near and dear ones in an organization, resultantly the following major frauds have came up into existence.
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Source of data
(Dainik Jagaran)
News paper |
Fraud |
Fraudster
(Name Highlighted) |
Failure (Financial Impact)
Rs. In Crore |
Reason involve |
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28th November 2010 |
2-G Spectrum |
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1, 76000.00 |
First come first take spectrum license |
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13th August 2010 |
State level P.F. Fund |
Internal staff |
3.33 |
Payment to non staff or fake staff |
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11th September 2010 |
Land Embezzlement |
Jitendra singh |
300.00 |
A part of land around 1.75 bigha to get in his name |
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31st October 2010 |
AAdersh Society
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Ashok Chawhan |
25.00 |
100 flats to leader, officers and their relatives. assume the value of one flat be 25 lacs |
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28th November 2010 |
Madhu Coda |
Madhu Coda |
4000.00 |
Conversion of Black money to white money |
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Different dates |
Common Wealth games
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Suresh Kalmani |
740.00 |
The value in DDA, CPWD tender 60 crore but in isponser committee 800 crore difference be 740 crore |
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3.27 |
Payment to British company AM films without any agreement |
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.92 |
Total expenses on foreign travel 90 trips alongwith countries not connected with common wealth game viz. China, quwat, south korea, cuba |
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Total |
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1,81, 072.52 |
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This is the aggregate value of few major frauds just imagine daily other persons doing frauds in lower level means Thousand Rs. Value which are not counted here.
There are other sectors where on an individual basis money is transferring from one person to other; even a true person has to provide money to the legal matter to say that he is actually true otherwise he may lose the case.
The case files of these frauds will be closed soon without any decision or will carry on without any decision even after the death of the person committed fraud without punishing him as in the case of Harshad Mehta.
What is the loophole behind this fraud, whether no proper internal checks, why these matter not come to the knowledge of internal auditor in the initial stage ?
There is no such facility to detect such type of frauds in audit software. We have to use our trick, mind and most probably the case history of earlier frauds mostly in audit of government sector, Banking and Insurance sector because these persons are very clever they will misguide you when you find something wrong in their records.
Conclusion:- I think our system fails to detect these types of frauds or if I detect the same and after detecting that sometimes we become silent because issue is related to reputed person or political parties and again always the case left a ? on the issue. ‘How the fraud has been committed even after internal checks and internal audits? How many internal and external fraudster involve in this big game and at last what was the failure of system.
By Nandini Mishra
CAclubindia
