What are Corporate Frauds?How Can We Define Corporate? This one of the Very Tricky Question .in a Corporate world Frauds take place in the various stages and in various forms.
in Simple Terms, We can Say Corporate Fraud is the use of a false representation to gain an unjust advantage and criminal deception. In the broadest sense of the term, a fraud can encompass any crime for personal gain that uses deception as its principal modus operandi.
Corporate fraud consists of activities initiated by an individual or company that are done in a fraudulent or illegal manner and are designed to give an advantage to the perpetrating individual or company.
Corporate frauds can have a disastrous effect on the business firms in which a fraud has happened. The loss in the organisation can also have an impact on the local, state and national economic conditions based on the size of the business affected by the fraud. Fraud cannot be performed without some sort of rationalisation, even when there are enough motivation and opportunity.
How can We Constitute that fraud has been taken?This is again very Carefully desirable factor.in simple word If Following elements are presents then we can constitute there is fraud.
(1) It is a misrepresentation of a material
(2) It is made intentionally and purposely.
(3) It is made with the intent to cheat.
(4) It relies on the misrepresentation by
(5) It results in injury or damage to the
What are The Factors that Lead a Person to Commit a Fraud.?
One of the major Factors Which lead a person to commit corporate fraud is Wrong Motivation.
There are various factors which enable individual or company to commit fraud.There are some points which I am considering which play very vital role in Wrong Motivation.
•Financial greed .
•High personal debt
•Addiction that requires money like gambling .
•Poor credit rating .
•Power Dominance .
•Maintenance of lifestyle standard or living beyond means.
•Possessiveness about custody of records/ office space .
•Inadequate income .
•Frustration with the job.
Second and one of the most viable factors is an opportunity.if there is Enough opportunity then the person has very convenience to commit fraud.There are various elements which Create Enough opportunity for committing corporate fraud.some of them are:-
• Weak or inadequate internal control .
• Excessive trust in certain employees.
• Unprofessional environment
• Lack of appropriate separation of duties or independent checks.
• Inadequate management approval.
• Inadequate system control.
• Nexus with the supplier .
•Inadequate record keeping with respect to misappropriation of assets.
• Poor physical safeguards over cash inventory or fixed assets.
• Lack of mandatory vacations for employees holding key positions.
Last and one of the most important factors and without this fraud cannot be committed is a rationalisation.
• Low moral character.
• View of fraud as action less crime.
• ‘Rules do not apply to me’ .
• A strong desire to beat the system .
• The sense of entitlement .
• Lack of strong code of ethics.
What is Fraud Under The Companies Act, 2013?
The corporate division is mainly regulated by the Companies Act, since different provisions have been provided in the Act for regulating the affairs of a company and the first time the concept of fraud has been inserted in the Companies Act, 2013.
Explanation to Section 447 says:
for the purposes of this section—
(i) “fraud”, in relation to affairs of a company or any body corporate, includes any act, omission, covering of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss.
(ii) “wrongful gain” means the gain by unlawful means of property to which the person gaining is not legally entitled;
(ii) “wrongful loss” means the loss by unlawful means of property to which the person losing is legally entitled”.
Who are The Victims of the Corporate Fraud.?
There are Enormous parties involved within corporate diphtheria and each is linked with one another.hence corporate fraud commits,its effects all its stakeholders and parties involved within corporate diphtheria.
Corporate Fraud Effects Bank Employee, Employee, Customers, Government agencies,creditors,investors Etc.