Fraud, Corruption and Bribery: How to Detect and How to Prevent

Abstract

Much of the rhetoric from India's last electoral campaigns has focused on corruption. In fact billions of dollars are lost every year due to fraud related activities. Financial fraud and then the consequent bankruptcy of a business was one of the reasons for the financial crisis and is usually an extremely costly event. Downturn in financial and economic conditions has triggered a jump in the fraudulent activity in the corporate world. In this talk using fraud triangle we will briefly discuss why people commit fraud. We will give some case presentations of few of the frauds that have happened and the lessons which we can learn from these frauds to prevent future frauds.

Many business decisions rely on the accuracy of financial statements, but resources are not available to comprehensively investigate all of them. Moreover, detection of fraud in financial statements is difficult. Consequently, there is a need for better aids such as detection models developed using supervised learning. Using models developed in this research, financial statements can be automatically classified as either fraudulent or legitimate, as well as being ranked according to their likelihood of being fraudulent. This information can be used to improve early detection, which would mitigate the costs of fraud and help deter it from occurring by increasing the probability of being detected. Beneficiaries of this information include auditors, investors, financiers, employees, customers, suppliers, regulators, company directors and the financial markets as a whole through improved integrity and allocation of resources.