Additional laws and harsher penalties can eliminate crimes if the criminal feels that there is a direct relationship between punishment and crime. According to the deterrence theory of crime if there is certainty of punishment, additional laws and harsher penalties will reduce financial fraud or even mitigate it. Additional laws can make punishments more severe and harsher penalties can increase the intensity of punishments. These can be effective only if the enforcement of these laws is efficient and those who perpetrate financial fraud feel that they cannot escape detection if they commit a financial fraud.
First, harsh laws and penalties are sometimes …show more content…
Effective internal controls reduce the loss of assets and help in ensuring that financial statements are reliable and effective .
According to Manne, (1966, pg.123), effective control helps in many ways in protecting investors against fraud.
Internal controls can be in form of policies procedures and even physical barriers to assets and goods.
First there must be policies and regulations This guides the way information is delivered to the outside parties.According to Langevoort, (1991, pg.66), having no guidelines influence access to assets without no limits by non-partisans and individuals and therefore not good for trade in stocks and bonds and therefore can lead to fraudulent cases.
Qualified professionals deal with trading. The risk of engaging non-partisans in sensitive matters influences financial fraud in an organization.It is significant to define the duties of each employee to be able to trace the origin of a fraud acts that will arise.
Formulatation of transaction systems It defines a process and regulations in participating in certain trade. According to Langevoort, (1991, pg.66), proper procedures are also significant to avoid any deviation from a normal