Fraud
Got Fraud?: The
Prevention of
Business Fraud
Lauren Ferraro
Objectives
● Explain what exactly fraud is
● Discuss major cases of fraud, mainly
concerning scandals like Enron
● Discuss laws put into place to prevent major
fraud cases
● Decide which law has proved more effective
● Discuss the different tactics of preventing fraud
Fraud
● Purposeful deception
● Person aims to have a gain
o Financial
o
Personal
http://skcdocs.com/blogsktx/tag/fraud/#sthash.cUvo6aoL.dpbs
Enron Scandal of 2001
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Sixth largest energy company in the world
August 2000 stock prices were $90.75
November 30, 2001 they were $.26
Declared bankruptcy December 2, 2001
http://www.riskencyclopedia.com/articles/enron/
Enron’s Downfall
● Covered up financial weakness to investors
● Arthur Andersen destroyed financial documents
● Overstated profits by $600 million
http://www.sefinanzas.com/noticias/2966-reviven-el-nombre-arthur-andersen-una-decada-despues-del-colapso
A Catalyst
● Enron, among others, showed SEC an issue
● Stock market crash
● Public demanded tighter restrictions
http://caleb.21stcenturyenetwork.com/mystery-cycles-stockmarket-crashes-mystery-shemitah-year-every-7-year/
Sarbanes-Oxley Act
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●
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More responsibility
Tighter restrictions
Require outside audit
Enforced by SEC
http://www.slideshare.net/RizzeCaminong/sarbanesoxley-act-9354519
Companies (Audit, Investigations
and Community Enterprise) Act
● UK version of SOX
● Very similar to SOX
● Enforced by SFO
http://www.cyogate.com/ispy_fraud_prevention.html
Comparison of Laws
● Punishment much more severe with SOX
● Code of Ethics required with SOX
● Management must state effectiveness of
internal controls to auditors with SOX
http://www.formalesonly.com/pills/semen-increase/semenpills-comparison-chart-truth-to-be-perfect
SEC Annual Report
SFO Annual Report
Are These Laws Effective?
● Two different methods:
o Actively Searching
o Reacting
http://achievemarketing.hubpages.com/hub/Effective-and-Successful-Teams-Is-it-Teamwork-or-Performance-that-Matters
Which Method is Better?
● Actively Searching
o Prevents dramatic stock market changes
o Insiders
o Gets down to the bottom of it
http://imgbuddy.com/magnifying-glass-detective.asp
Which Method is Better?
● Reactory
o More cases brought to light
o Reveals flaw
o Cheaper
o Less secretive
http://www.counsellingincanberra.com.au/2011/01/responding-and-reacting/
Opinions?
http://www.dylanmalloch.com/2014/06/opinions-do-yours-stand-up-to-scrutiny.html
Tying It All Together
● Fraud affects everyone
● Laws implemented to protect consumers
● Debate over which fraud fighting method is
better
http://bridalmusings.com/2011/06/a-unique-wedding-invitation-tying-the-knot-literally/
Any Questions?
http://stateimpact.npr.org/ohio/2011/08/16/any-questions-for-sb-5-sponsor-state-sen-shannon-jones/
Citations
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PDF
File
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Web. 9 Dec. 2014. <http://www.cnbc.com/id/101623433#.>.
Serious Fraud Office. “Annual Reports and Accounts”. 2014. PDF File.
Serious Fraud Office. “Operational Handbook”. 2014 PDF File.
"The Devil's in Their Details." Action Fraud. 20 Nov. 2012. Web. 14 Nov. 2014.
<http://www.actionfraud.police.uk/thedevilsintheirdetails>.
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Web. 14 Sept. 2014. <http://www.economist.com/node/940091>.
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<http://www.npr.org/news/specials/enron/>.
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