Fraud is the intentional activity to gain personal benefit directly or indirectly illegally, against organization or entity policy. Error is unintentional mistakes in the preparation or. presentation of financial information. Additional Information What is the difference between fraud and error?The distinguishing factor between fraud and error is whether the underlying action that results in the misstatement in the financial statements is intentional or unintentional. Unlike error, fraud is intentional and usually involves deliberate concealment of the facts. The error refers to an unintentional misstatement in the financial statements, including the omission of an amount or disclosure. So, we can say that the words fraud and error have different meanings. Therefore option no. 3 is correct.