Auditing vs Fraud Examination vs Forensic Accounting

In general terms, fraud is an intentional deception, whether by omission or commission, to realize a gain. Under common law, fraud includes four essential elements:

  • A material false statement
  • Knowledge that the statement was false when it was spoken
  • Reliance on the false statement by the victim
  • Damages resulting from the victim’s reliance on the false statement

In the broadest sense, fraud can encompass any act for gain that uses deception as its principle technique. This deception is implemented through fraud schemes, specific methodologies used to commit and conceal the fraudulent act. The legal definition of fraud is the same, whether the incidence is criminal or civil. The difference is that criminal cases must meet a higher burden of proof.

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A Brief History of Auditing

The term “Audit” is derived from the Latin term “Audire” which means “to hear”, because in ancient times auditors listened to the oral reports of responsible officials to owners or those having authority, and confirmed the accuracy of the reports. Over the years the role evolved to verify written records also.

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