Fraud

Fraud is an intentional act involving deception, concealment or breach of trust to obtain an undue advantage — financial, reputational or commercial. In business, it may be internal (asset misappropriation, financial statement fraud, corruption) or external (vendor fraud, customer fraud, cyber fraud). The ACFE estimates that organisations lose approximately 5% of annual revenues to fraud. In financial due diligence, fraud risk assessment — through internal control review, analytical procedures and cash flow analysis — is an indispensable component before any acquisition. The fraud risk triangle (opportunity, pressure, rationalisation) guides the qualitative assessment of vulnerability.

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Example: due diligence on a French services SME reveals a complete absence of segregation of duties at the accounting level: the same person issues purchase orders, validates invoices and executes payments — a structural vulnerability. This finding triggers extended testing of supplier payments, identifying CHF 185,000 of suspicious transactions, and leads to a specific warranty in the SPA covering pre-closing internal fraud.

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Hectelion systematically assesses fraud risk and internal control quality in every financial due diligence engagement.