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

CHAPTER ELEVEN

Legal Issues Surrounding Fraud

The more gross the fraud the more glibly will it go down, and the more greedily be swallowed, since folly will always find faith where impostors will find imprudence.

—Charles Caleb Colton, British author and clergyman (1780–1832)

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

• Evaluate the current legislative framework for the country/countries within which the organization is operating and evaluate the effectiveness of the legal structures as a deterrent mechanism for fraud including electronic fraud of an international nature.

There are two primary legal systems under which a case of fraud may be made. These legal systems operate in different jurisdictions. Common law traces its roots to the ancient laws of England under which the courts would rule based on precedence and the customs inherent in the particular society. These precedents were interpreted by courts and other judicial tribunals.

In England, these precedents were decided on by three different legal authorities: the Exchequer, the King’s Bench, and the Court of Common Pleas. Before AD 1215, the king’s word was law and all cases had to be brought before the king’s court (curia regis). Following a revolt by nobles against the power of the king, the original Magna Carta (Great Charter) was established and forced on King John. This charter established the fundamental principle that no one, whether king, noble, or lawmaker, is above the law. (The text of the Magna ...