Any illegal activity or fraud act for creating profit by individual or by any company is corporate fraud , several section of different status define and states fraud and illegal activities such as section 25 of ipc, section 17 contract act.
Section 25 of Indian penal code 1860 fraudulent
Section 25 fraudulent of ipc 1860 states fraudulently , A person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise.
Indian contract act section 17
Section 17 fraud of Indian contract act 1872
Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent , with intent to deceive another party thereto of his agent, or to induce him to enter into the contract:-
- (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
- (2) the active concealment of a fact by one having knowledge or belief of the fact;
- (3) a promise made without any intention of performing it;
- (4) any other act fitted to deceive;
- (5) any such act or omission as the law specially declares to be fraudulent.
vimla v/s state of NCT Corporate fraud
Case: vimla v/s state of NCT. There should be two essential of fraud i.e deceptive/ deceive and inquiry in the company.
Types of fraud in corporate fraud
- Financial misappropriation
- misappropriation of paymet fudgin the book of account, misleading the investors to invest by rapidly increasing the share price.
- Misappropriation of assets
- stealing physical assets IPR intellectual property rights dummy/ fake payment using in person asets.
- corruption
- making or recieving improper payments offering bribes to public official taking political supports to commits fraud.
- first fraud case of corporate in India was east india company.
Concept of auditing, companies act, Corporate fraud
An audit is when an auditors examines or inspects various books of account followed by a physical inventory check to insure that all departments are using a defined system of recording transaction, it is done to insure that the financial statement presented by the organisation are accurate.
Principles of Auditing, Corporate fraud
- planning
- honestly
- securacy
- audit evidence
- internal control system
- skill and competance
Steps of process
- establish audit
- prepare the audit
- report
- analysis record
- the very first stage is to eatablish the auditors position which is typically done through with a letter signed by the client.
- the second phase is to prepare the audit which gives information like timelines and that when the organisation will be scrutnised
- the third phase is the result which are usually published in a form of report
- the final stage is analysing the finding in the report prepared by the auditor.
Advantages of auditing
- Accuaracy in the financial system
- errors and fraud can be disscoverd in the accounts book
- it gives a second opinion of their finacial standing
- since the books are closely examined it helps the employees to the honest and resposible
- the financial statement get more credibility by their auditing
Disadvantages
- extra cost
- makes major changes
- employees feels harressed
Basic principle governing on auditing
- Arthemetic precision
- sharp in calculation/ maths
- principle of accounting
- tally the credit and debit
- asset verification
- check out assets working properly
- liability verification
- whether the liability real or not
- attestation
- cross verification
- statutory obligation
- whether the organisation/ companies are following the SEBI or statutory guidelines or not.