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Definition of Fraud

G. Jack Bologna, Robert J. Lindquist, and Joseph T. Wells define “Fraud as criminal deception intended to financially benefit the deceiver (1993, p. 3). It is called a criminal because the action is carried out with malicious intent, resulting in the perpetrator benefiting and the victim experiencing financial loss.

In everyday terms, fraud means dishonesty. Fraud can be defined as any illegal act characterized by fraud, embezzlement, theft, concealment, or non-violent breach of trust. Fraud is carried out by individuals, groups, or organizations to obtain money, goods, or services, or to benefit themselves, groups, or other parties (individuals, companies, or institutions).

Not only occurs in one type of organization, but fraud can also occur in public companies and private companies. So the possibility of fraud is everywhere.


1. Common causes
a. Concealment
b. Opportunity
c. Motivation
d. Success
e. Attractiveness

2. Secondary causes
a. Weak control
b. Poor relationship between employer and worker
c. Challenges
d. Revenge


Fraud causes billions of dollars in losses every year and leads to inefficiencies, project cancellations, financial difficulties, and organizational failure. Fraud often occurs when control systems are poorly designed and existing governance is inadequate, which weakens an organization.

Organizations must have strong internal control procedures to prevent fraud. One of the roles of an internal audit is to try to eliminate or eliminate the causes of fraud.

In accordance with the IIA International Standard for the Professional Practice of Internal Auditing Competence (1210.A2), Internal Auditors must have sufficient knowledge to be able to evaluate fraud risks, and how these risks are managed by the organization.