fraud

Illegal, dishonest, or improper activity. Fraud appears in many guises, including (i) the manipulation of accounting data (or *cooking the books), (ii) the theft of *assets, and (iii) the sale to Competitors of confidential or sensitive information about an organization. Fraud can be committed by an individual working alone, in contrast to Collusion, which requires the cooperation of two or more individuals. Fraud involving deceit by an organization’s *directors or senior *management can be difficult to detect, yet it can have potentially disastrous consequences. The difference between fraud and *error originates in the intentions behind the actions. Fraud has always been of concern to auditors, particularly during the development of modern auditing in the nineteenth and twentieth centuries. In 1843 the accounting writer B. F. Foster remarked that "no system of accounts is secure from the designs of the fraudulent" (quoted in Chambers, R. J., 1995, 72). The legacy of the importance of fraud in external auditing is evident in the *expectations gap - the continuing discrepancy between public and professional opinion on the extent to which external auditors are responsible for fraud detection. Further reading: Apostolou et al. (2001); Genaldi (2002); Graham and Bedard (2003); Hillison et al. (1999); Makkhawi and Schick (2003); Shelton et al. (2001); Vanasco (1998)