L\rmr,.

h..!ffedsalLconnrcntr.Jrl \d.rorrlLr
nlc{ms. or irrrcn pndrn trnJ irrrSr ldi
nrcp.er rriodA.cod,r,r, rr,! l5{riar oi
(^CFE, ?0t0) fidd h r dtrolnn d

3 i n'-

,:"_" ""
o @;

ol

n.:i:,,..,.,,_.,,",..""

0re

o.

enlry o. soN orrr. pMy. rri otld yoirs. misrars ue mr l.:ud rtrd.ed. D

fra!d, Eotrpl ol Inraoulous irdnLduls

n nipLlrt, n

businAs wirh rh! intnlion olmikins monc), or obhi',iig s.oJj dtr.!! l

Ffuud chnt thc rargei orgrnLzdion ol irs L.g
imonr rrd rc
nioney, id evei soodNi and r.pudion Fnrc ofrer ftirrors iLrugu

Nt

irtdksl!

nut

.nrLoyca in r rosnloi

ro commii

lftui fnd

ene

rcuotr dotre b) ofe or nor t&\d nom rh. so.idy s

ich
rlie us olG& Prcrcn

Lc:do

p.

'nvolvs
ineerlomjsradumrgeTr,eadhorrLbecoi..m.d\ilhrhei.auduledacrioshadiicroa
risnincrar frh ncati.n ol fiMNiaL sjtudiois Thc fRud inyoLving peEoN G.fl rrtr hrd{shit
hvelis kiosd uidcr rh. mfrc nadag&irlrrs!d indrlrone iieolviDeonlj 4riq sempLolees
is imed ttrud br.mnLoycs L$oci3ron" The tFAcr rftfdariofut Audir shnd dr 1.10
p00e) defims so r)-r ofnaud rclevrnr for rhe sudnor: (.) Fahificaiiois rhar m ca6d br
mn.epsedtrion ol$c ssersjand {n) Falsifi.dioDr rhar e muad by rrr tutrdtrlrnr fin.icirL
'h.
reponifg, meoidg rlE bash acriod rhr li$ orovokld a rahificarioi olrhc nnan.i(Lsnudionr
wa don. inrcnrio.ill, o./and uninI.di.nxLlr.
taud i5 sl.o kno\D 6
s r qp. oataud th muss a fratcnat ntnaromcnl in thc
deLibe're aali li.lrion ol rccon i'
k.sadions, balan.s or dndon
tu misrpptndoi .t
i o.ill rcponing dijrdrds: niis i: dn.n cad.d o( {i1h the inrn'
fiDaocill5brcmctu Nnh a p,rdi!ul?. bir,lo' example comrrriS Lixbiti.i.s in ordd ro inprove
atr) af r J_sis olliqtridiN bd gcanng

I\{.\CNIIUDE O! FRAUD
orsoianiois orrllqpcs add st s arc srbj...10 iraud or a nunbrtoaocca\ionr o!{$L rEL
rex dftades, diajor Nblic contidics hrv. .rpnicnccd fi.Dciat nponids tiud, .htrLLins ii
rumoiL in rhc U.S. c.pir.l m ko6, r lo$ ot slrrcholdrt valuc, and, ln somc .ars, 0r
btrikrutty ollhc lompany ibclf Allhongh I is genmll] a...rcd hd rhc Strbans o{ky Ad
hs imprcycd coao.rlc sovcmancc:nd d.crcded rlr f.d.i.e oladud, rccc ndi.s ?M
strd.l\ indicdc rhd
. ro hrvc conc.os rbour nmici.L
u.F.nr ft i; Forcnmph:
i Tlr Aso.hrion otccnifird Fr Esmoes. (;\cFrr) r0l0 Rqr

rmcalnarnc n:ud, whilc rcprcs.riLrg

rduJ in irsrepon.qN by rar rhc no{ ..nrt. I th'
F.di$ 1os olsl.7 miLLioD per ifficatr su .r' prdi.pinr srimMd rrd {h. qrnrt
orgrnir.ion losA 5% or ils
ro rraul (rch
Applied ro rl'.20rr ln $
'eyeiuaro I porenrirt ),ea. aDnRl raud Los orn.c
wond Pmdu.! rhG figu.u hNLirss
t.ojcd.rn
drai $r.r rirjoi th. Fcdian Losi c $d b), rlc o..dr i.nat riaud.ses i oy ludr
Lls$l40,000.Moarharotr. fifthorrh.sc!r.s.:redtosdot'h6. mi on.nf
niudsreponedrousl iedanEdi&0fi3monrhsbero.eb.idsdcr.drd
.,FnuduLenr financirr Repodris:
1993-100r," fion $e comfrir.c or sl.n\.ring
nd rhn

hryzi

mhsiotr (rhe 1010 coso rnld Rcpon).

31? frauds iNsriEared b) rhe u.s
.s lnd Exchanee co'rmhsion (s!c) i.om
(he mediai dorrs lmoun{ ofc.ch inn,n.e or raLLd hid
1993 ro 1007 and ldmd

rb

s..u

ltuee times 60n ihe lerel ir a sihl!. 1999 nud.r, from a nredni ot sl I
mlLrio' in rhe 1999 nudy b srz m rlior Id lddilroi, rh. ncdiin size ollhe comDatr]

inmccd

A "?009 xr'lr, rr!!r" ol 204 execuriv$ ot U S nr, ru I \ L i unu rucorud

5150 Diir 0,.!, dr,,r tolnJrhat65 pro of rj(Nnrr\ifduqlfrrrdrobcd

! riL.n.( ft

idemficdrinrfu! ;!ponnst.audasofcotd.hlgh(rf\r\
Fir./si p{s .i Llt app'oriDuicl ?,100 bN,*s F)!r.rLr

tnrr.r idiu(

th,d

'

qouLd b

rrylrd
l',''';'

!r

o|host
du.ne a

Ac.odira ro'AnD!rrrtr!d lndicaror20t2"coidu .d b! rlr Ndlirfi FrLd Arhoriv

ro 2006, :0t0 id ?0rr r }rs !:r, l0 4d r3 bi io's,
flpcdivetl r5s?0t:*rioareissigtrifi.hlygre d rlnn th3 palious filDr.s bclrus
ir indudcs d.r d idprolod srtm esDanunb{ordcd

eca oflhe LiKe.oionr -

l,3r:l

i.r!dcas

exrnjD.d hy i6 nonbds if hore rhan t00

.ou b. ^e n.
,.p..r. .i
^1 !'c!:.n o 1 ., o^h liLhr,.r.lop..
' ."
siz, ncauEd in r.ns or.umbs ofcmptoyc.s. forsman orSsniartons
(undd ro0 cmployes)i
ihe tuqoeDcy or rratrd .d{ erce.d.d rhar ol ltrs{ oissrrltotr iid lnc mcdim 1os *d
(h

tbr rhe trgen or[E rou sia .arsones .crcnud theRepodchcj!h.tiniled

moun! oflinmcirlard huniu rcsokrcs avaikbG for fraud prvc ioi in lnalt oqadzlions d
a m?jor drivn ortu eulc ir addirion,leld*ship orsnaD orsmja{or iyti.a|y hru clo*r
rcb.ion:liips *i$, and rd i,i, rlrir employ*s, md dru, hay ens.sc itr !$s oE6ighr tft.rt
contols &e ih. fi6lline otdcftdsr:glini fmud. wtcr lrong coDrots r! Lrrting, o. Rhci
conkohde inpla.cblrdmra urLLy followen, dreetrvnoimen( ro' nrud G.nhsced.
compmble !o

l(ukih

l0 000 cmr o,ees

(source Asociariotrolceniried fraud Examiic6,20l0.Repon {o

FdDd and AbNe," pp ?r.19. hrp:/xls.acrc.comrndnln.r0l0.pd1l

dr ldion ono.cupaiioDrl

Irlocovcr, nnmcirl satmcnl l.iud \ a coDribulng lador ro rhc dc finxncial disn d ir

rlrcrlln.d rhe efncnoly, lhuidiry ed sarer,v ofborh de6r rd captral
(Bh.k, ,010)
'^utds
Funlicmorc. irhdnsni6canrryiicra.d umcelnlymd vot iliqiI' Jii3i!iilmrhds,
sh3trirs
Dvsbr conndence $orLdrid! FSF aL:o rdu.s r]tr .pdirabiliry or 6trrLtj! intomarion dur
i,ivsro{ ue in invenm.nl d.!irions ]vlEn brri'E inloaccounirhe toss oai(venorconfid.c.
a q.ll6, rcpurarional dmigc Dd ponrirrfiD.s sd criminaladLors. ir i\ ct4r *hy tinecirr
taul-E rd.d nistlh sc (ri.!y.lrie olrv.r
thetml"|raud(Lrdlfidh.illLPonillg.and -fitrb.ial narmed rruf irt clljacrn!

d. ...
." L

onI "' b'o.

m,.: 6,

d raor"ud rd o
o o Ic&.-r
o
r^'lud becaur oldie po$ibiLi!- rd hc dis.ovrted
'r'!6. -

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re1

dnd puiishcd. Th. cE

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|rutuhnt fidtrncirl nponine cai hrsc s;1lificmr coisequcr!* td rh. oigtrtriario( ui

irs
mlchordfts, a \eD es forpubln $nlidoj;. iD rtre c$irrl nrure6. Pdiodic
hirf
tE{
rofl(
or LauduL.n lnrrirl ponirg d:o ntr. ntrams *our llic {cdibiln}
or d( us firurlirl
!d I m o q!. oi rr. r!s oa mmagdrcnr, audiroF, rqrrriro^,
and
r r r. mo ,t o ler t ?tbtrs to.:rl

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t:rjcdtrq etevard lhe

oo bi.. roo o.
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co.po,r offc{s itr 31 .oun6i.s .o,rdNkd b! pr e$,nllceam|je"
ir"q "*"1. ,r,, r"
rh. pcr sihrns on.r qa, mtre fiElirl lom n d! hlw b;, di;.okrcd
md Rp.,,.d.
finm.n sc.jdahddr.!mor

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orr0
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m kdvr !Bu,eElikdyirnlrd 6rrcsDLrot6e nmjctr! lacDu! taud
No dolbl.

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. socGry sn.e b.ro.L the rndrrirj Revolutjoi Dunnr 0r

" ".a ,a, .,.*

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i.*

lr lhisco en, P.rson 4a1., (1003) renrkc4,tquir jrndLtrgllndil is sistrtficanlbeqN n

is or. orrhc n6r n'jor fiiocid sc!n&ls, vh{e conpdu^ wse usd ro Arisr in p.4ctarjn! r

!,

.. .P.:.e q o:^,

blh h6 }irn{sd r ihbq ot ye _kiowD exmpks or^

iNolriig luge od.prsisjo6.coDp is.ii dsvdoped.
counhns T[. ncdia h6 aponed $aidats ard b$tiuprcies D cotrioaaies. such s. suibeam K
man, En,or, crobs crosi.g (usAl, nccl Masrc, polty p{k (uK) Md rnH hsrcla
(Adnlir) said$ sod3ls in developcd .outuhs, $,hich hrrc sotlrislilatd crpirat hrrtus
md rgdario,i.

siDilr.a cDb

5rirh Dugi[g,.jrui

-t
mrket Asi counris: hNe also e
ts..i Bali md s rk
M5 Oro+ (r don{ a), Bmgkok Bmk or con,i!rce (rhaitrd), unired EDcimrts }rhd
(_Mrlayslr), sinnLrg Ehdoftr andHyuid.i (Korc.) rhe co{oD1e.otlap*s orlc.en!1im*j
curmi"arii! !i.h mxsive coIrpscs, strch 6, d)osc otEtron D rlrc U s., Hllr in Ausht]4 and
srilD, i, L,dja har sussened irar ihde e. i3lor.r),nemic probhnr facine rhe way jn {r,ilh
co'po.arior add cc openr

E.e hll r.Diile :.countin! :6&h iJivoLri,3 mrlLtr lompui.s *ond*i{lc, !.h as
&..xca*f .mun arion paid to some clos hlr rtici qoeiions about (he fldionshf
The

bc'y.di.rrri:r L.ddship, fiimciar in.edires rid rln,n..ii, miscponing (chen. r0r0). Durhil
lenr linanci!L Eponin! mcidenk in rft U s, simiLarcoaoat
in rv{al oihr couit !r
ol toreisn !d,roc'!
a(ouning na!& qcrc commided blln.iti.s rhd (oo(lord thcr busines* in morc tlu oi!
.ounry d mon orftse enlilies aie also lnod oi ! s !o.k crchbg*:Thc lis. ofcolj.rat
tiariala.c.unr ,g$Ddrh inlheU.S. h exronsiv!. atul eilh oie L!6 rhe cruk olono or i'ot
regulrities. T'ble l ni.rlrA i lmpc ol u.s. .ofrFni.r lMl
E/ofrhen frauJr enl fino..l Eponins adiyilies (ts!da*1.
?001) O(6.a, ii,r! trqo.i emariona!compini.s b$ci in.ighr dillcFn!.ontri$ l']vc rlro
commiGd fiiM.lJ accoudr trg tauds.Txbl.r id.nlifi- rh*enine iot.narioniLcompini{ rad
,c nauf oJ llie :c.omd's iftgula tls dicy comntrtd (Taub 200r)

k"lC*dolcorDor

i;;a;;fiM;;

A..otrtrrin

b|llqLetn4siENM.q[i

orrq r.adi otjrei6cenr inra{ includc zzzz Bci (1936), ph} Mortr992), c0ndan. fl99rJ.
!r'rE Mmgefr.d' (r9e3l, sbbeai' (2002), Patrrlxr c001, aLons wirf a hon or o'h{j
s." rlt lotrg thr flch.d a nilrcrLm6s h:002 ti rhe rJs
d riig rhrtr Etron and
nj forermpiej ir.in 6c fen rtu itr?00: v.ndcom titcd
e hkro,.lr, rvcaLing rha. man.sfln.nr raudtrt.nrty miskr.d
ea.ni"gs. Anriu A d.rci. woddcon! audilor. ldilcd 10 iorne UStl 15 bittion shinim ot

'1.3o\1h{.

biJ 'xggrssiyc cmingt trsds r.d cnrd iiro numenu! comtL*

ranjadions ro ichicve rhos 0.gds " Adhu. atrddsf, r Ndl.tionn a(ou[ig fid, l.r.hr
linc b.svccn conn,Llins md a diring blLtr. Tlr .ollrpf .a hrgc comprtus sond*idr (HtH
instrranc., EnroD, wondcomt have sp..ked livcry irrerce in rhoano!n(o
eicddadilo6 rc.civc in.ldilion !o audtu lss.lnllie Aulraik.n!n
peidAdderei,1Sl r miLlionloreldn*ni.csandASl.6 mLLLio ror coosullaDcy s ices ro.rlE
1q99r1000 fi;in_.nfiriri;l tri t_.noiirjniinijj, ntiG tiicn dered rhd rh. dl. df cxrmal audhots
hrs beei $bjed b rrE i flrme ord'e boftd ordircdon ofrlE.o pry As r.nnines (?00i)
rac! {hirc rh. EDn,n/An1rc.\cn rdtlionrhip w6 exreme, irs
bc.omc so muddLcd rlrar adnor indcp.ndeme n

iidicdjoir of hotr 3 rdlrioishio .!n

srtrrt I r:i h..l.imedrh!.rh

.'i
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oo rino., d
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t'":

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As Peason er al., (2003) naj.

db.causor,incrin..r
.; " ;;-;. ."

"
, c.,,*.;;""..,
o

rn

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ll d {d

"^n rddna jia of e..;ivc

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resuhron hrvc xppre ty noliced rhe ic.d aor rorcDic a.coldtDs. [o. *ampk, rho
(sox). ,hc srxrenc on audhing s,mdtuds4e (sAs -ee, a"d ,h"'tuL"
oxhy

^d
Aa rm!
onteh( Boad (rrc^ou)
ecouM e

idonc^

(corrik d

hare rcr

amod

rL, 2005). 1.hc

0rc

pr-!r*

pcAou r.conmc

nts.i" o o dd'.-d.

qqd;4 ariddi&*r nLb!iL*6ao{n-dm.sr.

!fulnloEiq6$n6.!rd!(od.,u]r)!q

o o..

sabba.

4;;;",,r

!rd

\! j ile &k

o3

Lr!n).

Th. co4io.rc {and,Ls ol rh! t$r L* yca6 qm

a rriocti. nor
becaui ot ftc cnomL!. or
railufs, bui ahd b..!irsc of6e dkcovery rhar'qusriodab c llcotrfiitrg pEdico
ta.'lior
insidrous md widardrd $xD rrcviody envirioned.,,A d.finil. link b
lailures d poor cc, rhs, i5 b.giminS ro cmc'!. Fo. ii{rd.c, B.dawi (r00) vcry aplly

jd

obrnrs: iAdcLrhi4l;r !xampl., {c siven a very tow?a% rtriDsby tNrlturomtsh ;hokrt

sean$ or is cc icorc. tn Eropc, p m.td 3rd Royrt holJ e3rc nnk.d jn $e botun
qudire orconpr(tcs in 6c iDJcx provm!d by covtrmdc. M.rns rnriDa(ionr "simit t],,ltr
coaomrc Liba'l-hadrsu.d.dir tairu'r:frlis5ln rsp.cr orborh wo
inueding nm,bs or rcsriclra Do* m fiddlng thil poor cc is a teadifg ftdor in poo.
coeodrtons and
rcdomanc.j manipuLared firadcirr .erid, and
rlAulatory bod ies ecurcmlyrryrsrDrMlr'7.rdd.omcr yexiiingd.G$ifrrr.rponing
sy$.d. rn lddirion, dhcusion on ie rehvrtrr otto nsic rccodis n d.rccrrs a(ou ing
scmdak ha em(Rcd in rcccn. ycir.

'ne iaud

.s*

inlomatiotr to

danib.d rbov. impLi4 rha. rhes .oaonrlons hive l]

drn ]rv.{or, bd rd providc appmpriak dndo$rs of y hDedjoN rhd

r cnsn ol confiden.e i. Jinan nt reponiig pd.ri.c and

mcchinisms ccodinsly, a nunber of clnds hrvr b..n .onducrd ro
prveird,ep.$ibitiry otsimil*scaDdats in the rodhcomins firurc.,
effedivenas ol

cc