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This paper examines the role of professional associations, governmental agencies, and international accounting and auditing bodies in promulgating standards to deter and detect fraud, domestically and abroad. Specifically, it focuses on the role played by the US Securities and Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA), the Institute of Internal Auditors (IIA), the Institute of Management Accountants (IMA), the Association of Certified Fraud Examiners (ACFE), the US Government Accounting Office (GAO), and other national and foreign professional associations, in promulgating auditing standards and procedures to prevent fraud in financial statements and other white‐collar crimes. It also examines several fraud cases and the impact of management and employee fraud on the various business sectors such as insurance, banking, health care, and manufacturing, as well as the role of management, the boards of directors, the audit committees, auditors, and fraud examiners and their liability in the fraud prevention and investigation.

This study investigates the relation between lawsuit attributes that support an inference of fraud and the probability and the size of securities lawsuit settlement. A sample of 607 securities lawsuits between 1996 and 2006 is used in the analysis of the probability of settlement and a subsample of 261 lawsuit settlements is used in the analysis of the size of settlement. The empirical results indicate a positive association between the probability of a settlement and accounting irregularity, SEC enforcement action and stock offer. Accounting irregularity and SEC enforcement action are also documented to be positively related to the size of the settlement. The results imply that a stock offer supports a strong inference of fraud and the presence of accounting irregularity and SEC enforcement action in a lawsuit filing strengthens the fraud allegation and increases the likelihood of a settlement. The findings also suggest that the stronger the inference of fraud, the greater the size of the settlement. The results of this study add to our understanding of the determinants of securities lawsuit settlement. Studies using securities litigation as a proxy for fraud can use the results of this study to distinguish between fraud-related and nonfraud-related lawsuits.

Reports on measures taken by the Benefits Agency to fight benefit fraud during 1993‐94. Categorizes fraud activity and reports on recent investigations. Describes the organization and specifies three ways of dealing with fraud: prevention, detection and deterrence. Outlines current and future plans.

This paper examines the issue of fraud on the Internet and discusses three areas with significant potential for misleading and fraudulent practices, namely: securities sales and trading; electronic commerce; and the rapid growth of Internet companies. The first section of the paper discusses securities fraud on the Internet. Activities that violate US securities laws are being conducted through the Internet, and the US Securities and Exchange Commission has been taking steps to suppress these activities. The second section of the paper discusses fraud in electronic commerce. The rapid growth of electronic commerce, and the corresponding desire on the part of consumers to feel secure when engaging in electronic commerce, has prompted various organizations to develop mechanisms to reduce concerns about fraudulent misuse of information. It is questionable, however, whether these mechanisms can actually reduce fraud in electronic commerce. The third section of the paper discusses the potential for fraud arising from the rapid growth of Internet companies, often with little economic substance and lacking traditional management and internal controls. The paper examines the three areas of potential Internet fraud mentioned above and suggest ways in which these abuses may be combated.

The purpose of this study is to investigate the relation between the size of the legal penalty for fraud and CEO turnover.

Using a sample of 93 securities lawsuits that were filed in the US between 1997 and 2005, logit regression is used in the analysis of the relation between probability of CEO turnover and size of the litigation monetary penalty and ordinal logit regression is used to examine the relation between timing of CEO turnover and size of the litigation monetary penalty.

A positive association is documented between the size of the monetary penalty and the probability of CEO turnover. A larger monetary penalty is associated with earlier CEO turnover. Equity issue related securities lawsuit is associated with a higher probability of CEO turnover and an earlier CEO turnover.

The results imply that the greater the legal penalty levied on the sued firm, the more likely the CEO is considered as being complicit in the alleged fraud. A limitation of this study is that in constructing the sample, some meritorious lawsuits that may have resulted in legal penalty but were dismissed for procedural reasons were excluded. Further, the CEO turnover data did not provide sufficient information about the reason for the termination of the CEOs.

This is one of the first empirical studies to examine the relation between the legal penalty for fraud and CEO turnover in the period after the Private Securities Litigation Reform Act. This study adds to the existing literature on the consequences of financial misreporting on managers by documenting an association between the legal penalty for fraud and CEO turnover.

The study aims to overview the different types of internal-led cyber fraud that have gained mainstream attention in recent major-value fraud events involving prominent Indian banks. The authors attempted to identify and classify cyber frauds and its drivers and correlate them for optimal mitigation planning.

The methodology opted for the identification and classification is through a detailed literature review and focus group discussion with risk and vigilance officers and cyber cell experts. The authors assessed the future of cyber fraud in the Indian banking business through the machine learning–based k-nearest neighbor (K-NN) approach and prioritized and predicted the future of cyber fraud. The predicted future revealing dominance of a few specific cyber frauds will help to get an appropriate fraud prevention model, using an associated parties centric (victim and offender) root-cause approach. The study uses correlation analysis and maps frauds with their respective drivers to determine the resource specific effective mitigation plan.

Finally, the paper concludes with a conceptual framework for preventing internal-led cyber fraud within the scope of the study. A cyber fraud mitigation ecosystem will be helpful for policymakers and fraud investigation officers to create a more robust environment for banks through timely and quick detection of cyber frauds and prevention of them.

Additionally, the study supports the Reserve Bank of India and the Government of India's launched cyber security initiates and schemes which ensure protection for the banking ecosystem i.e. RBI direct scheme, integrated ombudsman scheme, cyber swachhta kendra (botnet cleaning and malware analysis centre), National Cyber Coordination Centre (NCCC) and Security Monitoring Centre (SMC).

Structured and effective internal-led plans for cyber fraud mitigation proposed in this study will conserve banks, employees, regulatory authorities, customers and economic resources, save bank authorities’ and policymakers’ time and money, and conserve resources. Additionally, this will enhance the reputation of the Indian banking industry and extend its lifespan.

The innovative insider-led cyber fraud mitigation approach quickly identifies cyber fraud, prioritizes it, identifies its prominent root causes, map frauds with respective root causes and then suggests strategies to ensure a cost-effective and time-saving bank ecosystem.

This paper aims to assert that knowledge of organisational weaknesses, vulnerabilities and compromise points (here termed “dark knowledge”), is just as critical to organisational integrity and hence, must also be managed in a conventional knowledge management sense. However, such dark knowledge is typically difficult to identify and accordingly, few studies have attempted to conceptualise this view.

Using a background of fraud diamond theory, the authors examine this dark knowledge using a case study analysis of fraud at a large Asia-Pacific telecommunications provider. Semi-structured interviews were also conducted with the firm’s fraud unit.

The authors identify six components of dark knowledge, being artefactual knowledge, consequential knowledge, knowledge of opportunity, knowledge of experimentality, knowledge of identity and action and knowledge of alternativity.

To the best of the authors’ knowledge, this is the first paper to identify a knowledge type based on organisational compromises and vulnerabilities. The paper shows that accounts of organisational weakness can yet provide knowledge insights.

On 25th June, 1997, the US Supreme Court issued an important decision in which it endorsed an expanded theory of insider trading liability under the federal securities laws. In United States v O'Hagan, the Court held, in a 6‐3 decision, that a person who misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information, may be found liable for securities fraud under s. 10(b) of the Securities Exchange Act of 1934 (the ‘Exchange Act’) and SEC Rule 10b‐5, which prohibit the use of fraud or deception ‘in connection with the purchase or sale of any security’. In endorsing the ‘misappropriation’ theory, the Court resolved a longstanding split among the federal Circuit Courts of Appeal and upheld an important tool in the prosecution of securities fraud. Separately, the Court held that the Securities and Exchange Commission (SEC) did not exceed its rulemaking authority under s. 14(e) of the Exchange Act when it adopted Rule 14e‐3(a), which prohibits trading on the basis of material, non‐public information concerning a tender offer, without requiring the government to show a breach of fiduciary duty.

The purpose of this paper is to offer case studies of hedge fund fraud, solutions that could mitigate hedge fund fraud risk, and a proposal for the industry to establish a hedge fund information depository (HFID) where participants/stakeholders could provide information on any hedge fund on regular basis.

Four major hedge fund fraud cases, Bayou Funds, Lipper Holdings, Manhattan Investment Fund and Maricopa Investment Corporation are used as examples of the complete absence of independent oversight and the application of HFID.

The paper finds that investors in the four funds lost more than $1.3 billion. In all four fraud cases, independent oversight and compliance function were conspicuously missing. In each fraud case there was at least one serious alert (warning) that took place at least 14 months prior to SEC first filing against the fund.

Some hedge fund industry stakeholders may reluctantly join HFID due to concern over possibly disclosing information deemed crucial for their own competitive advantage.

Had third parties become aware of the alerts, they could have made a different investment or business decision. Most importantly, this depository would allow all hedge fund industry stakeholders (accountants, administrators, auditors, investors, marketers, prime brokers, custodians and regulators) to communicate with one another regularly.

The paper makes two proposals: the founding of a hedge fund information depository; and outsourcing of the compliance function for hedge funds where it is more cost effective.

This paper introduces fraud as asset misappropriations (85 per cent of cases), corruption and fraudulent statements. Symptoms include accounting anomalies, lack of internal control environment, lifestyle and behaviour. The most effective tools for fraud detection are internal audit review, specific investigation by management, and whistle‐blowing. The paper details the fraud investigation process and the role of auditors as fraud examiners. The correlation of fraud perpetrators' personality with the size of losses is examined. Personality is analysed into age, gender, position, educational background and collusion. A strong system of internal control is most effective in fraud prevention. Fraud prevention procedures, targeted goals and improvements to system weaknesses feature in the paper. Fraud impacts on accounting transactions in accounts receivable, receipts and disbursements, accounts payable, inventories and fixed assets, and financial reporting. The monetary impact resulting from fraud is analysed by the type of victim and the amount of loss. Internal control and good employment practices prevent fraud and mitigate loss.