PURPOSE OF THE ARTICLE
The authors wrote this article to study the relative effects of threats of incarceration, fines and professional censure on attitudes about committing financial statement fraud. It is important to consider that deterrence mechanisms are most effective in the context of financial statements fraud given that financial statement fraud is by far the most costly and difficult to detect. It causes a median loss of $4.1 million per incident and takes the longest to detect at an average of approximately 27 months (ACFE, 2010).
Besides, financial statement fraud is also difficult to monitor and control because it is mostly committed by executives who have authority to override internal controls. Other factors such as potential sanctions by external agencies may provide a better defense against financial statement fraud since internal controls may not be an effective deterrent. As such, the relative effectiveness of various types of formal sanctions that are typically leveled against those that commit financial statement fraud should be of interest to regulators who have to allocate scarce resources over a number of deterrence mechanisms.
The remainder of this article demonstrates a discussion on fraud deterrence as well as recent legislation aimed at deterring financial statement fraud. It is then followed by formation of a hypothesis and an analysis of the results. The paper is concluded by discussing the potential contributions of this research.
METHODOLOGY
This study uses policy capturing methodology, which is a a robust method for understanding multi-criteria decisions (Aiman-Smith, Scullen, and Barr, 2002; Cooksey, 1996). The authors state that it is a suitable method to test their hypothesis because it exp...
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...ncial information relative to threats of fines or professional censure.
The hypothesis is tested by first developing a hierarchy of the relative salience of the legislated sanctions (incarceration, fines, and censure) on participants’ attitudes about fraudulently reporting financial information. It is then followed by collecting information related to participants’ perceptions about the certainty (likelihood of enforcement) and severity (imposed severity, influenced by the degree of enforcement) of each type of sanction and tested how those perceptions influence each sanctions relative salience in the formulation of participants’ attitudes.
All tests were performed separately for the MBA and professional groups. Also, the degree to which observed results are influenced by GDT constructs of severity and certainty is examined in the process of testing the hypothesis.
Fraud is one of Canada's most severe acts of financial criminality as the economic impact of this crime could potentially handicap an entire society. According to the Canadian Anti-Fraud Centre Annual Statistic Report (CAFC), a report established to monitor fraud with the aid of the Royal Canadian Mounted Police (RCMP), and Competition Bureau of Canada, it reported an annual loss of 74 million dollars affecting over 14,472 victims (Canadian Anti-Fraud Centre, 2014). Given this alarming statistic, it is worrisome that we as a society still ignore or turn a blind eye towards those who commit fraud as seen in the low conviction (Canada Revenue Agency, 2014), and focus our efforts on petty thefts as seen with the high rate of convictions
Financial statement fraud makes up a marginal (less than 10%) percentage of occupational fraud cases, but the median loss is significantly higher at $975,000. A fraud scheme occurring over a significant amount of time will likely result in much higher median losses. For example, a fraud scheme lasting more than five years could result in median losses of $850,000. Larger companies are more likely able to implement strong anti-fraud controls due to size and finances, therefore, smaller companies become more susceptible to fraud schemes due to lack of proper preventive controls. Preventive controls include: implementing internal controls, continually updating the company’s Code of Conduct, rotating jobs/duties, and
The Pardoner is the best representation of an allegorical character in “The Prologue” of Geoffrey Chaucer’s The Canterbury Tales. The Pardoner is the perfect personification of fraudulence. He shows this in three basic ways: his appearance, speech, and actions. If one just glances through the reading of the Pardoner than one will think that he is a good religious man, but if one look further into it than he will find the small double meanings that he is the exact opposite. Chaucer likes to use an allegorical style to add some comedy and sophistication to his writings.
In the year 2002, Adelphia Communications Corporation faced a massive accounting scandal that led to company’s bankruptcy and later reorganization. This paper will attempt to identify, analyze and evaluate the consequences of misrepresentation of financial accounts on a company, industry and economic level. Moreover, it will attempt to examine factors influencing the corporate failure from an auditor’s point of view, and consider the measures that auditor could have taken in order to enable quality and completes of information communicated to external users.
Macbeth uses deception and lies to become king from killing Duncan to killing his “friend” Banquo. Lady Macbeth is not much better. She also deceives Duncan when he comes to stay in their castle. She later tries self-deception to rid her of some of the heavy guilt she is feeling. The witches use deception with Macbeth, toying with his life. Their false prophecies eventually leave Macbeth unprepared and lead to his downfall. While many different strategies are used in this play by Shakespeare to get Macbeth the kingship, deceit is the most prominent and important in the entire play.
[17] Robert K. Elliot, CPA and John J. Willingham PhD, CPA, Management Fraud: Detection and Deterrence. New York: Petrocelli Books, Inc., 1980, pp. vii.
There is currently a huge growing number of criminals that now do greater and more widespread damage to their victims without ever meeting them. Identity theft surfaced in the early 1990s and turned peoples everyday transactions into a data gathering game. Bits of personal information such as bankcards, credit card accounts, income, social security numbers or just someone name, address, and phone numbers are now collected and could be used illegally by these individuals without anyone’s knowledge.
Perri, J.D., CFE, CPA, F. (2011, January/February). White-collar crime punishment too much or not enough?. FRAUDMAGAZINE, Retrieved from http://www.all-about-forensic-science.com/support-files/white-collar-crime-punishment.pdf
Weld, L. G., Bergevin, P. M., & Magrath, L. (2004). Anatomy of a financial fraud. The CPA
Taking a look at Donald Cressey’s hypotheses which is now known as the fraud triangle depicts the certain criteria for the mind frame of the fraudster. The fraud triangle is a theory that consists of perceived pressures, perceived opportunity, and rationalization. It gives us the different pressures placed on individuals that would make them consider “cooking the books.” It also demonstrates where the possible opportunity lies so that we may take precautions to eliminate the opportunity. Last, it demonstrates how a fraudster rationalizes with themselves to make committing the fraud okay. Donald Cressey believes all three elements must be present for fraud to occur. Upper management is usually the focus of financial statement fraud because financial statements are done at the management level. So in this case financial statement fraud was committed by the CEO Gregory Podlucky
Health South (Lupica, 2014), one of the biggest healthcare provider, committed fraud by increasing the value of their earnings on papers and increasing the values of their stock prices. Many investors were fooled by the company’s accounting figures. Health south used to fill the gap of actual figures and target figures by making false entries in their accounts. After this fraud got exposed, many high level executive were sent to jail who spent their precious years cleaning
Although Hollate introduced a compliance program and code of conduct when it went public, the programs were put on “the back burner”. This outcome is not surprised for that the company does not pay attention to the programs. It is, therefore, important to “reinforce the values” and “employee a boundary system when actions are inconsistent with the code of conduct” for the purpose of early detection. Tyco provides a good example after its scandal, by initiating “mandatory annual compliance training for all its employees worldwide” and creating the Tyco Guide to Ethical Conduct to familiarize employees with company expectations and help them make ethical decisions. As tips is the most useful method for internal and external sources to detect frauds, the whistleblower hotline should be well communicated with encouragement on reporting any suspicious activity. In addition, to improve the effectiveness of the compliance program and code of conducts, Hollate should implement management monitoring and evaluation on a regular
In today’s day and age, there is a lot of news that is related to corporate accounting fraud as companies intentionally manipulate their financial statements to show a better picture of their financial health. The objective of financial reporting is to provide financial information about a company to its various stakeholders such as investors and creditors so that these stakeholders can make decisions accordingly. Companies can show a better image of their financial well being by providing misleading information. This can be done by omitting material information from the books or deceitful appropriation of assets such as inventory theft, payroll fraud, check forgery or embezzlement. Fraudulent financial reporting will have an effect on the This includes but is not limited to; check forgery, inventory theft, cash or check theft, payroll fraud or service theft.
Auditing has existed since the beginning of human society. Auditing was used mostly for the detection of fraud and was done through extensive detailed examination from ancient times until the late nineteenth century (Lee, 1988). Fraud was a great concern during the early history of auditing, because internal controls were not used or not used effectively until the twentieth century. The late nineteenth century was a turning point in auditing history, when laws like the English Companies Act of 1862 were enacted.
The two plays deal with similar issues of deception and hypocrisy present in the society and how people wear masks in order to conform to the social norms of their respective societies. Both the authors, Henrik Ibsen and Moliere have made effective use of ‘deception’ in order to bring their ideas and views through to their audience.’ Ghosts’ is a perfect example of a realistic play which attacks the hypocrisy present in the society and in its value systems. Ibsen therefore was known as the father of modern theatre. Tartuffe was written by Moliere in the age of reason. During this period writers usually wrote in a common genre which was known as the comedy of manners. As a form of satire, the genre of comedy was aimed at ridiculing human vices and follies in order to bring about a change in the society.