![\"Fraud](\"https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/03\/Fraud-Triangle-and-Fraud-Diamond-Theory.jpeg\")
<\/p>\n<\/p>\n
Corporate frauds are the frauds committed by the individuals against the organization who employed them and often this malpractice is done in a dishonest or an unethical manner. Corporate fraud is very hard to discover and very challenging to prevent at times. By incorporating policies, norms, and checklists, the company can somewhat mitigate the risk of fraud to a certain extent.<\/p>\n
Though the corporate frauds are conducted in different ways, however, most common modus operandi includes the access and illegitimate use of the company\u2019s assets and sensitive data (e.g., reports, facts, details of vendors, clients, and employees) and then leveraging these for the personal gain or benefit.<\/p>\n
The term \u201cFraud Triangle\u201d is used in various accounting and auditing studies that explain three basic reasons behind corporate fraud. The three points involved are pressure, opportunity, and rationalization. All three elements must be present for fraud to occur.<\/p>\n
![\"\"](\"https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/03\/WhatsApp-Image-2022-03-05-at-11.18.50-AM.jpeg\")
<\/p>\n
Pressure –\u00a0<\/strong>is a mindset of an individual or employee towards committing fraud. There can be a personal reason or financial problem e.g., not meeting the financial targets pressurizes employees to commit fraud.\u00a0<\/strong><\/p>\n Opportunity –\u00a0<\/strong>circumstances that allow the fraud to happen. It is probably the only major area where a company can exercise control over. e.g. poor accounting and financial statement recording, lack of supervision give rise to the commencement of fraud.\u00a0<\/strong><\/p>\n Rationalization –\u00a0<\/strong>justification for committing the fraud. One of the possibilities is, fraudster knows what he\/she is gaining from committing the fraud is much bigger than the consequences they might face if get caught. Secondly, he\/she must justify the fraud like \u201cthe company doesn\u2019t pay much that can satisfy my need and pay my bills\u201d, Or \u201cRevenge of an employee because of the mistreatment he\/she received at the company\u201d.<\/p>\n The term \u201cThe Fraud Triangle\u201d has now become \u201cThe Fraud Diamond\u201d.<\/p>\n According to this theory – even if a fraudster has a strong motive (pressure), opportunity, and justification (rationalization) there will be chances that fraudster might not commit fraud if there is no \u2018capability\u2019. Capability here means – Position of the fraudster in that organization, – intelligence and right expertise required to commit fraud, coercing others into the fraudulent activity, etc.<\/p>\n Corporate fraud is a major concern that can have a devastating impact on an organization’s revenue, reputation, and even its continuity. Hence corporates must take vigilant steps to cope up, combat, and mitigate the risk of fraud in their organization.<\/p>\n \u201cThe fraudster\u2019s greatest liability is the certainty that the fraud is too clever to be detected.\u201d – Louis Freeh<\/em><\/strong><\/p>\n<\/blockquote>\n![\"\"](\"https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/03\/WhatsApp-Image-2022-03-05-at-11.20.26-AM.jpeg\")
<\/p>\n\n