Corporate Fraud and Internal Control + Software Demo: A Framework for Prevention

CHAPTER TWO

Elements of the Crimes of Theft and Fraud

There are three things in the world that deserve no mercy, hypocrisy, fraud, and tyranny.

—Frederick W. Robertson, English preacher (1816–1853)

After studying this chapter, the reader should be able to:

• Briefly describe the elements necessary to meet the legal requirements to differentiate between fraud and conventional theft.
• Identify the principal control elements to reduce the likelihood of a fraud occurring and its impact should it occur, and to increase the probability of early detection in the event of an occurrence.

Common law, also known as precedent or case law, originated in the United Kingdom during the reign of Henry II (1133–1189), and is based on the concept that the decision previously made sets a precedent and should be followed in subsequent cases.

In the United States, individual states may have variations on the concept of common law. For example, Louisiana uses a system unlike any other state; it is based on the French Napoleonic code. California drew originally from its Spanish origins a system of Spanish civil law, which was changed in the mid-1800s into a codified system based on common law. The federal government operates on a variant whereby federal courts may interpret common law while Congress is free to legislatively overrule the court’s decision.

The common law offense of theft is one of the most prevalent offenses committed in today’s society. Theft can be motivated by simple greed, as when individuals ...