Fraud is still evolving with times as people can go around rules that were meant to prevent fraud or some are just too determined or as so greedy as may happened in the cases that may caused the present economic crisis. As pointed out by Professor Reena Agarwal of the Georgetown University, “It’s so difficult to pinpoint one person or two people [for the economic meltdown]. It was really the whole system. ” (Wealth Daily Investment Research, 2009).
This would mean that if no effort could be made to stop or at least control the extent of fraud and damages caused, then the problem could really be a difficult one to address. 2. 1 Fraudulent financial reporting Fraudulent financial reporting is done by companies basically in order to make it appear that the company is earning better than usual as way to project profitability which in reality is false. This would therefore attract investors to buy stocks or bonds of companies for investment purposes.
But since the information were false in the first place, the victims would end up losing money in the process. The effects are comprehensive as it could cause the collapse of financial market when investors may no longer trust the system. 2. 2 Misappropriation of Assets Misappropriation of assets refers to using the assets of one person or owner for the benefit of the other. Using the other assets without the required permission or approval is still considered illegal or immoral since the other person is deprived of the benefit that would have benefitted the owner.
The right of ownership of a property generally covers the right of its use unless the same is given to another way through legal means. 2. 3 Use cases to analyze fraud three factors (Enron, WorldCom, etc. ). This part will discuss cases of fraud involving Enron and WorldCom and analyze and how incentives/ pressures, opportunities and rationalization played their parts in the commission of fraud. The incentive/pressures to commit appears to be related to human psyche of greed where people unlimited needs and wants are brought to the extreme.
Opportunities refer to laxities of internal control in organization or the lack of check and balance mechanism and power is abused by those given the powers in the organizations. Rationalizations is a personal justification used by a person committing fraud as a way to possibly deny himself or herself the effect on self-esteem by the said act. One rationalization for fraud commission for example is that everybody is doing it and that doing in small amount is equated with the larger amounts so that if one steals and be caught he must as well steal big.