Fraud Deterrence

Fraud deterrence by itself doesn’t have a common definition to paint a clear picture. Fraud deterrence has gained wild popularity since the setting up Sarbanes-Oxley Act, way back in 2002. The act was passed to tighten the screws in public company and public accounting firms, in order to avoid accounting scandals. These scandals lead to massive losses to the investors when the share prices of affected companies crumpled. On the whole, the intention of the U.S. Congress in promoting the Sarbanes Oxley Act was to put efforts to proactively discourage monetary frauds to make sure that more precise financial reporting to boost investor assurance.

An actual description of fraud deterrence has been very difficult to frame. Fraud deterrence takes its basic principle from the fact that fraud is not an accidental event. It happens when the conditions are ideally suited for it to take place. Fraud deterrence takes shot at the root cause and the enabler of a fraud. This study might perhaps disclose possible fraud opportunities in the process. But it is done on the idea that improving organizational practices to diminish or get rid of the causal issues of fraud is the solitary best resistance against fraud. It involves both the short term as well as long term plans.

Fraud deterrence in stocks:

Fraudsters have gained much from the Internet uprising. Securities scams have turned into rampart and they have grown in monstrous proportions. Besides the regular safety measures, one needs to get acquainted with the technique of fraud deterrence in stocks. This has developed into a vital part of the curriculum of share business. Millions and millions of dollars are skillfully drained off from the innocent investors through clever methods.

Fraud Triangle:

The fraud triangle illustrates about 3 features that are always present in each and every situation of a fraud:

• Cause: the urge to commit the fraud.
• Validation: the frame of mind the fraudster is in that gives reason for him to commit the fraud.
• Opportunity: the circumstances that facilitates a fraud to take place.

Breaking of this fraud triangle is a key to the fraud deterrence. If one of the elements of the triangle is eliminated, the fraud can be averted.

Questions:

• What are the 3 factors that are present in a fraud triangle?
• Which act popularized the fraud deterrence and in which year was the law put to practice?