A.B.C.'s of Behavioral Forensics: Applying Psychology to Financial Fraud Prevention and Detection

CHAPTER 8

Managing the Ecology of Fraud

WHAT YOU CAN DO ON MONDAY MORNING

This chapter begins with a discussion of the markets in order that we may more closely examine the moral foundations of capitalism. Specifically, we demonstrate that illegal and unethical behaviors, if condoned, soon snowball and have compound, ripple effects because, in the final analysis, markets are based on trust and confidence in the interactions of the market participants. In fact, it is to maintain market confidence that the whole auditing profession was devised in the first place. In the 1920s, University of Amsterdam professor Theodore Limperg propounded his “theory of inspired confidence.” Limperg set forth a dynamic theory that connects society's need for reliable financial information to the ability of auditing methods to meet that need. He asserted that the confidence inspired by the independent auditor was the essence of the function, its very reason for existing.1 We also explore the role of ethical behavior in sustaining organizations for the long run.

We then discuss what can be done to help executives stay on the right side of the line. After all, in the final analysis, leadership, especially stewardship, is about caring about one's employees, one's clients, and one's career, and that requires a great degree of competence and professionalism. “Good ethics is good business” and makes for healthy, sustainable organizations.2

Whenever questionable ethical behavior surfaces, emotions are likely ...