Preventing Fraud and Mismanagement in Government

Chapter 7Policing of Public Corruption and Fraud

“Honesty is the best policy.”

—Benjamin Franklin

Topics:

• Key Regulations—Gaps in Federal, State, and Local Rules
• Enforcement—Who Are the Police?
• Enforcement Gaps—Do They Police?

Key Questions:

• Is there consistency in the application of the law, or do some get a “get out of jail free” card because of their affiliations?
• Why are there these expectation gaps?
• Can you legislate ethical behavior?

THIS CHAPTER ADDRESSES the key regulations over government corruption and the operational aspects of these laws and policies. The authors explore variation in laws, rules, and practices by states and compare them with federal law. In addition, the aspects of enforcement and policymaking by regulatory agencies are considered. Finally, a holistic view of government practice by type of agency is examined, with comparisons to international standards. Unfortunately, today's auditors need to understand the personalities of fraudsters, and, equally unfortunate, is that most do not have the required skills to determine the people who are likely to perpetrate a fraud. Proactive thinking is the skill needed to prevent fraud.

This chapter homes in on the Generally Accepted Accounting Principles (GAAP) and regulation. We do not require you to memorize rules but, rather, that you change your thinking that rules can prevent fraud. Can moral behavior be legislated? The authors employ a “reasonable person” standard. That standard is defined as ...