Thursday, February 7, 2013

Differences and Similarities Between Fraud and Corruption

Fraud and corruption are two words that we hear too often. Both are on the rise worldwide, and their methods are evolving to adapt to the development of technology. Who among us did not receive at least one fraudulent email during the last month?

Is corruption a form of fraud? Or are these two different things? A review of the definition of the terms may offer an answer :

A handbook published by the World Bank Group (Fraud and Corruption Awareness Handbook Defines fraud and corruption as follows:

A fraudulent practice is any act or omission, including a misrepresentation, that knowingly or
Recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid
an obligation.”

“A corrupt practice is the offering, giving, receiving or soliciting, directly or indirectly, of anything of
value to influence improperly the actions of another party.”

An IIA Chicago Chapter presentation (Auditing for Corruption in Emerging Markets) provides the following explanation of the two terms:

Deriving undue benefit by bypassing some controls or bending some rules. Fraud Schemes are used to commit corrupt activities:

• Asset Misappropriation
• Financial statement irregularities
• Corruption

Takes place in the form of providing illicit benefits; harder to find; narrower scope than fraud.

• Bribery
• Embezzlement
• Extortion
• Influence Peddling
• Unlawful gratuity favor or commission
• Nepotism
• Illegal Political contribution

 The Business dictionary differentiates between these two terms as follows:
 Fraud is misrepresenting yourself or something as something you or it is not. For example, if you use a fake ID, you’re committing fraud by misrepresenting yourself as someone else.
Corruption is a broad term that can be applied to fraud, as well as other dishonest acts such as bribery, extortion, or embezzlement.
The two can be used in a wide array of instances but can apply specifically to business. Corporate leaders are often prosecuted for various fraudulent and corrupt acts, as well as political leaders.

Have you reached a conclusion yet? One thing we can, for sure, agree on: Fraud and Corruption are very bad practices and should be prevented and detected at an early stage.

Photo credit:Shutterstock

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