Originally published on LinkedIn’s Fraud Talk newsletter.
Strip away the legal jargon, and fraud comes down to four simple elements. Once you can recognise them, fraud stops looking like a dramatic courtroom event and starts looking like something quieter and far more common: a classification, a note, a number that was always going to be wrong the moment someone with technical knowledge chose it.
The Four Elements of Fraud
- A misrepresentation: something false, or something true left deliberately incomplete
- Reliance: someone believed it and acted on it
- Knowledge and intent: it wasn’t a mistake, it was a choice
- Prejudice: someone lost something because of it
Patterns We See in Practice
The VAT that keeps moving house. A refund is due, but rather than let it sit still for scrutiny, the number gets shuffled: parked in a related entity, deferred into a different period, or restructured around invoices for services that never happened. SARS has become sharp at detecting related-party patterns, but the harder-to-flag version is when the only thing two “unrelated” companies share is the same accountant behind both sets of books. The misrepresentation lies in the return itself; the liability doesn’t disappear, it is simply kept moving for as long as possible.
The profit that was dressed up for the occasion. A set of financial statements needs to say something: support a loan application, satisfy a covenant, or keep a shareholder calm. So revenue gets recognised before it’s earned, expenses that should hit the income statement get capitalised instead, or a related-party sale at a price that wouldn’t survive an arm’s-length test inflates turnover in one period, only to unwind quietly in the next. None of it needs a forged document. It just needs someone willing to pick the number that tells the story management wants told, and readers, a bank, a shareholder, a board, who trust that the figure means what it says.
Why This Matters
None of this needs a criminal mastermind. It needs someone with technical knowledge, a plausible-looking classification, and the confidence that no one downstream will ask the one question that unravels it: what was the intention when this was first recognised? That question, asked early and asked properly, is most of what forensic work actually is.
Trust no one. Verify everything. Challenge the story behind the numbers, especially the convenient classifications and the shifting of liabilities. Prevention is always cheaper than cure, and in fraud, there is very rarely a full cure.
If a number in your business deserves a harder look at intention, JA Consulting offers confidential forensic reviews and fraud risk assessments. Contact us to discuss your situation.