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Whenever we discuss about any Topic on Fraud it is important to understand the word “Fraud”.
Fraud Definition: Fraud is defined as misrepresentation of a fact by the perpetrator of fraud knowing it to be false and the person “Victim” believing it to be true and acting on such belief and incurs monetary and financial losses while the fraud perpetrator gains at the cost of the “Victim”.
Integrity should not be confused with independence of the person conducting the investigations. The former deals with personal aspect and the latter deals the concept of being unbiased and it is an organisational matter. For example, the work done by an independent statutory auditor, Forensic auditor or an internal auditor should be unbiased and independent. Integrity on the other hand implies that the investigator should not be biased personally; At times personal bias will affect the outcome of investigations.
Thus, though both are inter connected, at the same time, both are not the same.
Integrity at personal level effects many decision-making aspects during the course of investigations. Integrity refers to virtue, purity and the state of being unaffected. It implies absence of fraud and corruption.
Thus, integrity refers to truthfulness and appropriate actions of the person. A person with good integrity will investigate without any biased opinions. Such persons will be free from conflict of interests and the judgement will not be affected and also there will not be any misrepresentation of facts.
A person with good integrity will have value to morals, ethics and are fair and honest and abide by the laws governing the land. Thus, Independence of any auditor is needed to avoid conflict of interest hence the auditors are appointed independently as external persons.
However, if the person has no integrity then even if the appointed auditors whether statutory, forensic or as fraud examiners will be biased or prejudiced and the opinions cannot be relied.
Thus, integrity is of utmost importance for an independent auditor and both independence and integrity go hand in hand for an effective opinion and report.