Internal fraud: What is it and how to organize prevention with Forensic Accounting Services in India?

Internal fraud: What is it and how to organize prevention with Forensic Accounting Services in India?

Internal fraud is very expensive for all companies, whatever their activity. Each year, they represent a loss of a great part of their turnover. If large companies are at the forefront of major media scandals, SMEs are also very hard hit. What are these internal frauds? How to act to protect yourself from it? What is the role of Forensic Accounting Services in India? Let’s know!

The main internal frauds


Internal fraud is committed by one or more company employees. It is defined as intentional deception or concealment for the purpose of obtaining personal financial gain. All of the company’s departments may be concerned: accounting and payroll, financial management, purchasing, sales, etc.

Here are some examples:

  • Corruption ;
  • Misappropriation of assets;
  • Overcharging;
  • Fictitious supplier or customer;
  • Diversion of checks;
  • Cash register error;
  • Fictitious employee;
  • Fraud on the expense report;
  • Communication of confidential information;
  • Communication of false information to mislead the person you are talking to (shareholder, banker, etc.);
  • Theft and extortion;
  • Falsification of financial documents.
How can the company act against internal fraud?
Detect fraud

Early detection is essential to limit the damage of internal fraud. In particular, it involves the use of IT tools and Forensic Accounting Services in India. When doing so, it is relevant to think about the following elements:

  • Reporting and alert procedure to quickly report any incident;
  • Data analysis and regular reports;
  • Regular internal and external audits;
  • Crisis management plan to quickly analyze detected fraud and find solutions.
Implement preventive measures


Alongside detection measures, the company must also implement an internal fraud prevention policy. Its effectiveness lies in a synergy of complementary actions as well as a strong involvement of the company.

  • Training and awareness of employees and managers: knowing the different risks, identifying fraud, implementing a prevention strategy, etc.
  • Corporate culture focused on transparency and the fight against fraud: the company’s commitment against internal fraud, drafting of an ethics charter, information on the penalties incurred, etc.
  • Reinforcement of internal control, implementation of safer procedures and tools. For example: double control of banking operations to secure payments.
  • Restrictions of use and/or access to certain software and tools
  • Particular attention paid to recruitment for sensitive positions
  • Clear and consistent distribution of everyone’s responsibilities
  • Regular communication between departments
The functions of forensic accounting


The fact that accounting fraud causes large economic losses has led to an increase in efforts to prevent such losses as well as developments and changes in the field of auditing and forensic accounting.

Integrating auditing and investigative techniques into the accounting field has given rise to a specialty known as “forensic accounting,” which focuses on the prevention and determination of accounting fraud.

Forensic accounting is the act of determining, recording, analyzing, classifying, reporting, and confirming to historical financial data or other accounting activities for the resolution of current or future legal disputes. This historical data is also used to evaluate financial data in the settlement of future legal disputes.

The definition of forensics in the accounting profession is related to the relationship and application of financial facts to legal issues. Forensic accounting contains an audit of accounting records to look for evidence of fraud and forgery and hence eliminates the ongoing frauds in a company.

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