RTI, Nagpur1 Day 1-SessionII Understanding fraud and corruption Understanding fraud and corruption

RTI, Nagpur2 Session Overview ☀ Understanding corruption. ☀ Audit mandate and audit mandate within SAI India. ☀ ASOSAI understanding in fighting fraud and corruption.

RTI, Nagpur3 Definition of ‘Corruption’ – Prevention of Corruption Act, 1988 ☀ Act involving illegal gratification by public servant for himself or for any other person as a reward in discharge of official duties. ☀ Act involving illegal gratification for inducing another public servant through personal influence to do a favour or any disfavour ☀ Habitual acceptance of gratification by a public servant other than legal remuneration as a motive or obtaining valuable thing without adequate consideration or misappropriation of property entrusted by dishonest means is criminal misconduct. Also involves criminal breach of trust. Also involves criminal breach of trust.

RTI, Nagpur4 Elements of ‘Corruption’ ☀ Two parties – one offering reward/inducement and the other accepting the same ☀ Involves misuse of office for private gain. ☀ Involves dishonest use or breach of trust of office or authority. ☀ Involves actual or potential risk of loss or misappropriation of public property.

RTI, Nagpur5 Many cases of fraud involve corruption ☀ Most financial reporting fraud involves misstatement through  Through manipulation of accounting records.  Misrepresentation or intentional omission of events, transactions or other significant information.  Intentional misapplication of accounting policies.

RTI, Nagpur6 Audit mandate ☀ Most SAIs have inherent right to audit cases of fraud during discharge of audit functions. ☀ Such duties are derived from the duty to ensure that adequate and effective machinery is in place to obtain accountability.

RTI, Nagpur7 ASOSAI recommendations for fraud deterrence ☀ Adequate level of financial and operative independence and breadth of audit coverage. ☀ Vigorous evaluation of adequacy and efficacy of financial and internal control systems. ☀ Focused audit strategy for high risk areas through developing effective high risk indicators. ☀ Exchange of information co-operation among national and international bodies fighting corruption. ☀ Intensify exchange of experiences of fraud and corruption among SAIs.