An Ounce of Prevention

Article excerpt

If you were to ask John or Jane Q. Public how to deter white-collar crime, I suspect the most common response would be "harsher punishment." Unfortunately, research shows that longer prison sentences are rarely a consideration on the part of a fraudster, who is generally convinced that his crime will go undetected. According to the Association of Certified Fraud Examiners' (ACFE) Report to the Nation on Occupational Fraud and Abuse ( fraud/report.asp), organizations victimized by fraud rarely recover their losses.

Many fraud experts agree that the most cost-effective way to fight fraud is to prevent it from happening, and that one of the best ways to prevent it is by increasing the perception of detection. This concept is relatively simple: A fraudster who perceives that he might be caught is less likely to commit the crime. One way to enhance the perception of detection is to increase the number of fraud and forensic accounting experts in the field. Just as law enforcement agencies put more cops on the beat to reduce street crime, an increase in the number of fraud "cops" could do the same for white-collar crime.

Interest in the area of fraud and forensic accounting has grown dramatically since the large corporate financial acounting scandals broke in late 2001 and 2002. And independent auditors of public companies are not the only ones seeking to learn more about fraud detection and deterrence. The IRS has increased its frauddetection training for agents in an effort to improve taxpayer compliance. Current accounting regulations and legislation require that corporate officers, boards of directors, and audit committees demonstrate their commitment to detecting and deterring fraud by establishing, for example, effective internal controls and a whistleblower hotline. Educators from the accounting, criminal justice, and business-related disciplines are investing in professional development in this area because of student demand for fraud and forensic accounting classes.

A Prescription for Detection

Last month I was one of about 200 attendees at the First Annual Fraud and Forensic Accounting Education Conference. Georgia Southern and West Virginia universities cosponsored this national conference, which was a byproduct of a project funded by the U. …


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