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Book part
Publication date: 18 January 2021

Rasha Kassem and Umut Turksen

The need for independent audit goes back to the agency theory, the theory of delegation of power and the issue of trust. Stakeholders delegate power to management to…

Abstract

The need for independent audit goes back to the agency theory, the theory of delegation of power and the issue of trust. Stakeholders delegate power to management to manage the business on their behalf, yet they face the risk of information asymmetry and management motivations to commit fraud. The main aim of having an independent auditor was therefore to reduce the risk of information asymmetry and fraudulent behaviour by management. Auditors are required by the International Auditing Standards to detect material fraud and error, and they are expected to have a duty of care for stakeholders. However, recently independent auditors, whether conducting private or public audit, have been scrutinised for failing to detect material fraud. There have been a lot of discussions in the literature about the role of private auditors in detecting fraud, but very little discussions about the role of public auditors in detecting fraud. This chapter will outline the difference between private audit and public audit; explain the legal liability of public auditors in relation to fraud detection; the role of public auditors in detecting fraud; and will critically review the root causes for auditors’ failure to detect fraud.

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Contemporary Issues in Public Sector Accounting and Auditing
Type: Book
ISBN: 978-1-83909-508-5

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Article
Publication date: 19 May 2021

Nurbazla Ismail, Zulfakar Ramlee and Afridah Abas

There is a broad description of fraud debated by academics around the world. The definition of fraud differs between governments, criminal justice departments and private…

Abstract

Purpose

There is a broad description of fraud debated by academics around the world. The definition of fraud differs between governments, criminal justice departments and private entities. Some questions can make this study important to explain the concept of fraud. This study aims to define the legal concept of fraud. The concept of a word is important to discuss because it explains the meaning of a word and that could answer the question on Macau scam – a fraud?

Design/methodology/approach

The content analysis is the research design of this study. Data were obtained by document analysis, including books, papers, journals, case reports and other records relating to fraud. The methods used to interpret the data for this qualitative research are empirical, deductive and inductive.

Findings

This study found that the concept of fraud has not yet been defined. This can give rise to a broad interpretation, depending on the action taken by the parties in the cases. On the basis of the context of the dictionary, fraud may be said to be the same thing as deception. Sometimes, the use of words to convey things that are different from, and even at odds with, the actual sense of words. Whereas, from a legal point of view, fraud still occurs as a matter of fact to be determined. This study showed that Macau scam is a fraud.

Originality/value

The implication of this analysis is for scholars and legal professionals to assess the principle of fraud prior to the accusation.

Details

Journal of Financial Crime, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 30 September 2014

Yanan Zhang

– The purpose of this paper mainly is to examine the relevant rules concerning documentary letter of credit (L/C) fraud under criminal law in England and China.

Abstract

Purpose

The purpose of this paper mainly is to examine the relevant rules concerning documentary letter of credit (L/C) fraud under criminal law in England and China.

Design/methodology/approach

The paper analyses the regulations about such crime and relevant literature.

Findings

The similarities and differences of such rules have been identified briefly. L/C fraud is considered a conduct crime; and unspecific or vague provisions concerning this crime may cause difficulties of application in judicial practice in both England and China. But the possible punishment for L/C fraud criminals under Chinese criminal law seems more severe than that under English law. Dealing with L/C fraud in international trade under national criminal laws is not effective. Regional and international efforts on legal assistance in cross-border criminal cases still remain to be improved.

Research limitations/implications

The limitation is that it examines merely relevant substantial rules in legislation. This opens the paths to future research on the approach towards L/C fraud demonstrated in court cases in England and in China.

Social implications

The research underlies the need to take serious attitude and make more effective efforts towards cross-border criminal cases, although different countries may have different rules concerning specific economic crimes.

Originality/value

This paper fills the gap of a comparative study on how L/C is regulated under criminal law regime in England and China.

Details

Journal of Financial Crime, vol. 21 no. 4
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 4 January 2008

G. Scanlan

The purpose of this paper is to consider the present and possible future nature of the legal regime regulating and seeking to control fraud and corruption on the part of…

Abstract

Purpose

The purpose of this paper is to consider the present and possible future nature of the legal regime regulating and seeking to control fraud and corruption on the part of directors and officers of companies in the UK.

Design/methodology/approach

This paper outlines aspects in the present and future fight against fraud and corruption on the part of directors and officers of companies, particularly with regard to public and listed companies in the UK.

Findings

The paper emphasises the need for the UK Government to secure adequate resources for the investigating and enforcement authorities to ensure that the law of fraud and corruption is effectively enforced, rather than pursue a policy of constant enactment of new legislation which is increasingly complex and ineffective.

Originality/value

The paper considers the creation of a new generic offence to supplement the new generic offences created under the Fraud Act 2006, based on the established principle of the fiduciary duty, a duty owed by all directors and officers to their companies. These offences could form the central core of a future legal regime regulating the conduct of directors and officers.

Details

Journal of Financial Crime, vol. 15 no. 1
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 13 July 2012

Andrew Haynes

The purpose of this paper is to analyse the nature and content of the laws relating to market abuse with a view to determining whether they only offer a civil law remedy…

Abstract

Purpose

The purpose of this paper is to analyse the nature and content of the laws relating to market abuse with a view to determining whether they only offer a civil law remedy for the State. The three categories of insider dealing as defined by the Criminal Justice Act 1993 clearly offer a criminal law based response, but as is shown here virtually all cases of market abuse can potentially be a basis for a criminal prosecution.

Design/methodology/approach

The methodology adopted is to consider the other relevant areas of law, namely the Fraud Act 2006, the law of conspiracy to defraud and the law relating to misleading communications under s.397 of the Financial Services and Markets Act 2000 and then to determine whether between them they cover all the areas of behaviour caught by the definitions of market abuse.

Findings

The consequences of this paper are that the Serious Fraud Office and the Financial Conduct Authority now have the option in almost any case of market abuse of considering whether a criminal or civil law approach is appropriate.

Originality/value

The approach adopted over the last two years by the prosecuting authorities of using the criminal law to a greater extent in serious cases of insider dealing can now be extended to market abuse generally where it is thought appropriate.

Details

Journal of Financial Crime, vol. 19 no. 3
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 10 May 2011

Simon Wesley Lane

The purpose of this paper is to analyse fraud investigative practice in London local authorities with reference to recognised best practice and two comparator…

Abstract

Purpose

The purpose of this paper is to analyse fraud investigative practice in London local authorities with reference to recognised best practice and two comparator organisations, the Department for Work and Pensions (DWP) and National Health Service (NHS).

Design/methodology/approach

Primary research was undertaken through questionnaires to all London Boroughs and interviews with key personnel in two comparator organisations.

Findings

Each London Borough has a specialist anti‐fraud response with professionally qualified investigators, demonstrates compliance with best practice and excels in areas such as case supervision and joint working. However, concerns remain, regarding a lack of agreed national standards and some failing to use the full range of investigative techniques, such as surveillance and computer forensic examination.

Research limitations/implications

The research was limited to London local government and further work is needed outside the capital.

Practical implications

Recommendations are made for: the introduction of national professional guidance to investigators; minimum competency standards for fraud investigation; research into the applicability of the National Intelligence Model to high volume fraud; and a less fragmented approach both within and across local authorities.

Originality/value

There has been no previous research of this type and it may be useful to government when considering how to deal with fraud, local authorities and those with an interest in public sector fraud.

Details

Journal of Financial Crime, vol. 18 no. 2
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 9 May 2008

John L. Masters

The Corporate Veil is seen not only as a means of limiting individual civil legal liability but also criminal liability. This paper seeks to highlight that this philosophy…

Abstract

Purpose

The Corporate Veil is seen not only as a means of limiting individual civil legal liability but also criminal liability. This paper seeks to highlight that this philosophy is fast approaching breaking point, and practices which once may have been considered “just business” are now considered criminal. Innocuous companies, their directors and officers have all of a sudden become sitting ducks for criminal prosecution and asset seizure. Corporations potentially risk metaphorical death sentences: their human controllers being labelled and treated as common criminals and accordingly disgraced, incarcerated and confiscated of a lifetime of accumulated wealth. This paper targets the “directing minds and wills” of companies and aims to invoke thought and action on redefining the notion of corporate compliance.

Design/methodology/approach

An analysis of recent innovations in mostly UK law regarding fraud and money laundering, with historical comparisons to show the changing community and legal perceptions – “the evolution”. There is also case study analysis and recent examples of community attitudes towards recent high‐profile commercial prosecutions.

Findings

That there is a definite change in how the public, lawmakers and governments perceive corporate non‐compliance, to the extent that most breaches qualify as criminal offences and that due to mutual legal assistance and incentivisation schemes, the risks to corporations and its officers are extremely high and real.

Practical implications

Corporations will need to be genuine about legal compliance beyond merely espousing platitudes and motherhood statements and more towards reinventing the compliance paradigm. This means that merely concentrating on strict legal compliance will no longer suffice. Corporations will need to establish and regularly revisit their values, with more emphasis on embedding a culture of compliance that is attuned to domestic and international community values. To choose to ignore these needs, risks the very existence of the company and also its officers being ostracised both commercially and criminally.

Originality/value

Traditionally, papers on this topic tend to concentrate on strictly legal or managerial issues. This paper looks at the issue from a more criminological perspective whilst not compromising legal analysis and business pragmatism, thus allowing an integration of disciplines in a context that can be appreciated by lawyers, managers and social scientists alike.

Details

Journal of Money Laundering Control, vol. 11 no. 2
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 4 May 2012

Siti Faridah Abdul Jabbar

The purpose of this paper is to examine whether insider dealing is fraud from the perspective of Islam.

Abstract

Purpose

The purpose of this paper is to examine whether insider dealing is fraud from the perspective of Islam.

Design/methodology/approach

The paper uses analogy (qiyas) of the injunctions in the Qur'an and Sunnah and critical analysis of literature on Islam.

Findings

The paper finds that insider dealing is fraud (taghrir) in Islam and the defrauded party has the option to rescind the transaction for fraud (khiyar al‐tadlis) as well as for latent defect (khiyar al‐‘aib).

Practical implications

The paper is practical as a source of reference in legislating laws relating to insider dealing particularly where Shari'ah is the principal source of law.

Originality/value

The paper presents a novel attempt in establishing that insider dealing is fraud from the perspective of Islam.

Details

Journal of Financial Crime, vol. 19 no. 2
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 5 January 2010

Michael Levi

The purpose of this paper is to generate data on sentencing within a framework that enables clearer understanding of the sentencing policy options.

Abstract

Purpose

The purpose of this paper is to generate data on sentencing within a framework that enables clearer understanding of the sentencing policy options.

Design/methodology/approach

Descriptive statistics on sentencing, and the relationship of this to principles of sentencing and sub‐types of fraud/organised crime offenders.

Findings

Fraud cases seldom attract severe sanctions where, as in the case of frauds against the EU, there are institutional victims and no apparent systemic risk, despite the prevalence and incidence of such frauds and the high value to offenders.

Originality/value

Data on sentencing fraud not readily available, placed within a framework of the purposes and effects of sanctions on different sorts of fraudster.

Details

Journal of Financial Crime, vol. 17 no. 1
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 7 October 2013

Andrew Haynes

The purpose of this article is to determine the burden of proof that is applicable in the range of activities covered by the civil offence of market abuse. It also…

Abstract

Purpose

The purpose of this article is to determine the burden of proof that is applicable in the range of activities covered by the civil offence of market abuse. It also considers the approach adopted in the USA and discusses the extent to which that approach may be worth applying in this country.

Design/methodology/approach

The methodology adopted is a mixture of black letter law in analysing the nature of the burden of proof and the relevant market abuse issues, historical research in examining how the modern law relating to the burden of proof has evolved and comparative research through the consideration given to the US approach.

Findings

The findings are that the burden of proof in market abuse cases is unclear, that the burden may well not be the same in all cases, that clarification is needed on the point and that the approach adopted in the USA offers the advantage of clarity. Therefore, its adoption should be considered.

Practical implications

The main practical implication is that cases are currently being brought without this key issue being properly considered and clarified.

Originality/value

The author can find no other research that has been published in this specific area.

Details

Journal of Financial Crime, vol. 20 no. 4
Type: Research Article
ISSN: 1359-0790

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