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The Serious Fraud Office (SFO) has received a larger number of cases for the third consecutive year. This perhaps reflects the increasingly common affliction of fraud in England. 1995–96 has provided the SFO with a number of high‐profile cases such as the Barings collapse and the Guinness appeal. The Barings collapse is still under investigation.

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.

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.

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.

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.

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.

The increasing profile given to fraud in the UK led the author to examine how the police forces were responding and whether this differed from the practice in both the private and public sectors. Research, amongst all UK police forces, and some private sector companies and public sector bodies was carried out in 1989. The research examined manpower, training and attitudes, concluding that police forces have a homogeneity of approach despite the separate powers of each Chief Constable; and that future fraud investigation needs to involve a number of disciplines.

Enforcement as a concept imports compulsion to comply with a particular norm. Of course, the nature of enforcement might vary considerably with the norm in question or society within which action is desired. Professor Gower, in his ‘Review of Investor Protection’, expressed the view that a rule that could not be or was not enforced brought the system, within which that rule was supposed to operate, into disrepute. Whether this is true or not may be a matter for debate. Most systems of control envisage rules that in practical terms are unenforceable, but that are expected to have a normative or educational effect. Such functions, in the context of securities regulation, may be thought to be of some significance. Thus, the fact that simply because a rule cannot either in its terms or in practice be sanctioned by a predictable and determinate action intended to promote compliance, does not necessarily undermine that rule let alone the system within which it exists. To assume without more that a rule that cannot be enforced is not a legal rule, or to be precise a rule of law, while no doubt appealing enough to the positivist school of jurisprudence, is simplistic and outdated. Furthermore, in the context of the sort of economic regulation that we are discussing, whether a rule is characterised as one of law or not may or may not have significance. While there is a problem with determining the appropriate degree of interface between rules bearing differing qualities, purely in terms of achieving a defined regulatory objective it might well be that a rule which is not law in the formal sense of having been promulgated by an authority with legislative power, promotes a satisfactory degree of compliance. Therefore, many of the rules that pertained prior to the creation of the regime of regulation under the Financial Services Act 1986 were essentially non‐legal in the sense that they did not carry determinate sanctions ordained by a legal process consequent upon a violation and were not promulgated by an authority with legislative power. However, to dismiss them because they were unenforceable at law would give a very false picture of the efficacy of what was for many years a satisfactory regulatory structure. Even today, although the interrelationships of legal and non‐legal rules is very much more complex, it is still the case that significant areas of regulation have been left to non‐legal authorities.

Fraud against the Community budget requires a supranational response because it is an area in which organised crime groups work on a cross‐border basis. The paper considers some of the difficulties confronting the mounting of such a supra‐national response: the inbuilt character of fraud on the Community budget, given the nature of the organisation; difficulties with information technology; the scale of the problem; the lack of prioritisation of the issue by Member States; corruption within the political establishments of Member States; and legal problems. The paper concludes with an examination of the available models for operational cooperation in the fight against fraud: the K4 Commission set up under the Maastricht Treaty, the SIRENE bureaux, Interpol, Europol and UCLAF, the Commission's own anti‐fraud unit. National police investigators have anyway set up their own cross‐border networks to combat the changing modes of cross‐border crime; but all this raises questions about national sovereignty and accountability.

Section 2 of the Criminal Justice Act 1987 abrogates the right to silence since a suspect is required to answer questions in pre‐trial investigations by the SFO, although the answers are inadmissible as evidence unless proceedings are brought under s. 2(14) for giving false information or by s. 2(8), where the individual ‘makes a statement inconsistent with it’. In a previous article, the writer has considered the necessity and effectiveness of s. 2 powers. It is also instructive to analyse the conceptual basis of s. 2 powers since this will aid in the interpretation of statutory ambiguities and will allow the courts to have a uniformity of approach when seeking to resolve the statutory ambiguities. The conceptual basis is also important as concerns the resolution of where the line lies between the effective investigation of offences pursuant to s. 2 and the rights of the individual subject to such questioning. A critical examination of the above issues demands steering a careful course between normative rules and theory: in this area above all others it is impossible and undesirable to divorce one from the other.

Serious fraud trials are the sum of their component parts such that examination of one particular area often repays attention. The Roskill Fraud Trials Committee's criticisms were the backdrop for the Criminal Justice Act 1987 and the enhanced investigatory powers that are to be found in s. 2 thereof. Seven years after the enactment of the 1987 Act it is apposite to examine whether in derogating from the confines of traditional criminal evidential practices a certain level of procedural and substantive fairness has been maintained. The Police and Criminal Evidence Act 1984 (PACE) and its application to the rights of a suspect are also of importance. A critical examination of the above issues demands steering a careful course between prescriptive rules and theory: in this area above all others it is impossible and undesirable to divorce one from the other.

Assesses the arguments for and against the establishment of an Economic Crime (or Fraud) Commission and relates these to the Roskill Committee Report’s recommendation for an independent body to monitor the effectiveness of how fraud case were conducted. Surveys the changes in the fraud scene in the fifteen years since Roskill: for instance, England and Wales have the Serious Fraud Office, a Fraud Czar was appointed for the health service, and high‐volume fraud and money laundering control have both developed. Contends that the arguments for a Fraud Commission are less clear than in 1986, partly because there is more auditing and reporting on fraud investigations, prosecutions and prevention, although there is no one body covering the whole picture.

This paper seeks to examine the problem of cyber fraud, a situation created by online financial transactions.

Examines the challenges to regulating financial fraud in cyberspace, e.g. those responsible for the fraud; the possibility of prosecution; and the position of cyberspace in the light of jurisdiction and control.

Finds that the introduction of internet specific regulation would be useful in combating cyberspace fraud.

This paper arguably breaks new ground in recommending measures to combat financial fraud in cyberspace.