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Fraud is a deliberate dishonest act that uses deception or a breach of trust to obtain an unjust gain. The word is often translated as cheating or deception, but its scope is wider. Fraud can be an employee taking cash, financial statements that are deliberately manipulated, or an official accepting a bribe.
This article explains the meaning of fraud according to three official references, how it differs from deception, embezzlement, and corruption under the criminal law in force since 2 January 2026, the three types of fraud according to ACFE, workplace examples, and the latest data from the 2025 Indonesia Fraud Survey. References were checked as of 29 October 2026. For a discussion of the examination itself, see the article fraud audit.
What Does Fraud Mean According to Experts and Regulations?
There is no single definition. The following three references are the ones most often used by auditors and anti-fraud practitioners in Indonesia.
| Reference | Summary of the definition | Emphasis |
|---|---|---|
| ACFE (Association of Certified Fraud Examiners) | Any activity that relies on deception to obtain a gain. When the perpetrator is an employee, manager, or executive who deceives their own organization, it is called occupational fraud | Deception and gain; basis of the fraud tree classification |
| Glossary of the 2024 Global Internal Audit Standards (IIA) | An intentional act characterized by deceit, concealment, dishonesty, misappropriation of assets or information, forgery, or breach of trust, committed by individuals or organizations to obtain unjust or unlawful personal or business advantage | A definition for internal auditors; broader than the 2017 definition |
| POJK 12/2024 Article 1 number 4 (for financial services institutions) | Deviations and/or omissions committed intentionally to mislead, deceive, or manipulate the financial services institution (LJK), consumers, or other parties, occurring within the LJK and/or using LJK facilities, so that a party suffers loss and/or a perpetrator or other party gains a benefit | Includes omission; applies to banks, insurers, financing companies, and other LJKs |
The three agree on two things: there is an element of intent and there is deception or a breach of trust to obtain a gain. Specific rules for financial institutions are discussed in the article anti-fraud strategy under OJK Regulation 12/2024.
What Is the Difference Between Fraud and a Mistake or Error?
The difference is intent. A miscalculation, a keying error, or a misreading of a rule without intending to benefit oneself is an error. When the same act is done deliberately to deceive and gain an advantage, it is fraud. Because intent is hard to prove, auditors first look for unusual patterns rather than accusing people.
Examples of patterns worth suspecting: differences that always favor the same person, supporting documents with uniform handwriting, or transactions that always fall just below the approval limit.
Is Fraud the Same as Deception, Embezzlement, and Corruption?
Not exactly. Fraud is an accounting and audit term. Under criminal law, acts that count as fraud can fall under several articles. Since 2 January 2026, the new Criminal Code (Law 1/2023, amended by Law 1/2026 on the adjustment of criminal penalties) has been in force, and the corruption articles have moved into it.
| Act | Article (new Criminal Code) | Penalty |
|---|---|---|
| Deception: using a false name or position, trickery, or a series of lies to induce someone to hand over goods, grant a loan, or write off a receivable | Article 492 | Imprisonment of up to 4 years or a fine up to category V |
| Embezzlement: unlawfully taking possession of goods belonging to another person that are in one's control other than through a criminal act | Article 486 | Imprisonment of up to 4 years or a fine up to category IV |
| Embezzlement in an employment relationship, because of a profession, or in return for payment | Article 488 | Imprisonment of up to 5 years or a fine up to category V |
| Forgery of documents | Article 391 | Imprisonment of up to 6 years |
| Corruption: unlawfully enriching oneself, another person, or a corporation to the detriment of state finances or the state economy | Article 603 | Life imprisonment or imprisonment of at least 2 years and at most 20 years, with a fine of category II to VI |
| Corruption: abusing authority, opportunity, or means available because of one's position to the detriment of state finances or the state economy | Article 604 | The same penalty as Article 603 |
| Bribery of civil servants or state officials so that they do or fail to do something contrary to their duties | Article 605 | Imprisonment of 1 to 5 years, with a fine of category III to V |
Under Article 79 paragraph (1), category II equals IDR 10 million, category III IDR 50 million, category V IDR 500 million, and category VI IDR 2 billion. The Elucidation of Article 603 states that state financial loss is determined based on the results of an examination by the state financial audit institution. Articles 2 paragraph (1), 3, 5, 11, and 13 of the old Anti-Corruption Law were revoked by the new Criminal Code, so old references are no longer accurate. The text of the law is available at JDIH BPK.
Two notes. First, corruption requires a loss to state finances or the state economy, so fraud in a private company usually falls under deception, embezzlement, or forgery. Second, this table is an educational summary, not legal advice. Determining the article for a specific case is up to law enforcement. References need to be rechecked periodically because judicial review cases are still pending and regulations may change.
What Are the Types of Fraud According to ACFE?
ACFE divides occupational fraud, that is, fraud committed by people inside an organization, into three major groups known as the fraud tree.
| Types | Meaning | Fraud examples |
|---|---|---|
| Asset misappropriation | The perpetrator steals or misuses the organization's assets | Unauthorized expense reimbursement claims, taking money before it is recorded (skimming), fictitious invoices from fake vendors |
| Corruption | The perpetrator abuses their position in a transaction for personal gain | Procurement bribes, conflicts of interest, tender winners that were arranged in advance |
| Financial statement fraud | The perpetrator deliberately presents financial statements in a misleading way | Revenue is inflated, expenses are deferred, debts or liabilities are hidden |
This grouping is also used by the Indonesia Fraud Survey. The concepts behind why fraud occurs, namely pressure, opportunity, and rationalization, are discussed in the article fraud triangle.
What Does Fraud Look Like in the Workplace?
The examples below are illustrations, not real cases.
- Fictitious expense claims. A staff member submits taxi and meal receipts for events that never happened. Relevant control: supervisor approval with original proof and random checks.
- Cash skimming. A cashier pockets customers' cash payments and does not record them. Controls: daily reconciliation, sequential receipt numbers, and segregation of duties between the person who receives and the person who records.
- Fictitious vendor. A procurement employee creates a fake vendor and approves its invoices. Controls: verification of new vendors, matching addresses and bank accounts against employee data.
- Revenue inflation. A manager records year-end sales whose goods are only shipped next month. Controls: cut-off testing and customer confirmation.
- Conflict of interest. A tender committee selects a company owned by a relative. Controls: conflict of interest declarations and rotation of committee members.
In the first three examples, the key is always segregation of duties and layered approval, as discussed in the article internal control.
How Often Does Fraud Occur in Indonesia?
The 2025 Indonesia Fraud Survey from ACFE Indonesia Chapter involved 417 respondents, namely practitioners, investigative auditors, fraud examiners, and other professionals. The main findings:
- Most common forms: corruption 47.6%, asset misappropriation 40.2%, financial statement fraud 12.2%. According to this survey, the pattern differs from the ACFE 2024 Report to the Nations, in which asset misappropriation predominated.
- Corruption perpetrators: middle-level managers 42%, senior level 39%, employees 17%.
- Largest asset misappropriation schemes: expense reimbursement claims 39.33%, skimming 19.9%, fictitious billing 14.39%.
- How it was detected: tips or complaints 53.24%, internal audit 19.18%.
- Most common warning signs: lifestyle beyond income 66%, unusual closeness with vendors or customers 11%.
These figures come from a survey of practitioners with 417 respondents, not national statistics on all cases. Use them as a picture of patterns, not as exact figures of incidence. Other fraud data in Indonesia from official sources is collected in the article internal audit and fraud statistics in Indonesia.
How Can Fraud Be Detected and Prevented?
Because most fraud is uncovered through tips, a trusted reporting channel is the first investment. Here are practical steps in line with the survey findings above:
- Provide a reporting channel that guarantees confidentiality and accepts anonymous reports, then make sure every report is followed up.
- Separate duties among those who approve, execute, record, and safeguard assets.
- Watch for behavioral warning signs, such as a lifestyle that does not match income, reluctance to take leave, or being too close to vendors.
- Test high-risk transactions regularly: procurement, expense claims, cash, and manual journals at period end.
- Set a clear code of ethics and sanctions and communicate them to everyone in the organization.
- Involve internal audit to review controls and monitor follow-up on recommendations.
What Is the Role of Internal Audit in Relation to Fraud?
Internal audit cannot guarantee that fraud will always be detected, but it provides assurance over the design and operation of controls, assesses fraud risk when preparing the audit plan, and monitors improvements. When there are strong indications, further examination is carried out through investigation, as discussed in the article fraud investigation and forensic audit.
How Does Internal Audit Software Help?
Audithink is not a fraud detection tool and does not replace an anti-fraud unit or investigators. Audithink is internal audit management software with six main features: risk assessment, audit planning, work program templates, notifications, follow-up monitoring, and automated reports. For fraud topics, these features help audit teams prepare risk-based plans, use consistent work programs, remind people of deadlines, and monitor follow-up on findings until completion. More details are on the page Audithink features.
FAQ About Fraud
What is fraud?
Fraud is a deliberate dishonest act that uses deception or a breach of trust to obtain an unjust gain. The official definitions differ slightly among ACFE, the Global Internal Audit Standards, and POJK 12/2024, but all of them stress intent.
What is the difference between fraud and corruption?
Corruption is one form of fraud. Under the new Criminal Code, corruption is regulated in Articles 603 to 605, and Articles 603 and 604 require a loss to state finances or the state economy. Other fraud, such as embezzlement or falsified reports, can occur without that element.
What are the types of fraud?
According to ACFE there are three: asset misappropriation, corruption, and financial statement fraud. In Indonesia, the 2025 Indonesia Fraud Survey found corruption to be the most common form (47.6%).
What are everyday examples of fraud in the office?
Fictitious expense claims, taking cash before it is recorded, creating fake vendors, inflating year-end revenue, and awarding tenders to relatives. All of them are illustrative examples in this article.
Who most often detects fraud?
In the 2025 Indonesia Fraud Survey, 53.24% of cases were first detected through tips and 19.18% through internal audit. That is why a safe reporting channel matters so much.
Is fraud always punished criminally?
Not automatically. Fraud is an accounting and audit concept. Criminal liability depends on the act itself, for example deception, embezzlement, forgery, or corruption, and on proof by law enforcement. Some fraud is handled through internal sanctions.
Conclusion
Understanding what fraud means helps determine the right steps: prevention through controls and an ethical culture, detection through reporting and audit, and handling in accordance with the law. In practice, organizations with a trusted complaint channel, clear segregation of duties, and disciplined follow-up monitoring are better prepared to face fraud.
If your team wants to tidy up its risk-based audit plan and follow-up monitoring, schedule an Audithink demo.
