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L3 Notes_Part_3 - U[E(Net Gain = Greed hyper materialism...

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Perceived Economic Incentives to Commit Fraud Committing Cognitive Relieving U( fraud ) = U[E(Net Gain)] U[Dissonance] + U [Pressure ] E(Net financial gain) = E(Gain) E(Penalty) E(Gain) = p * Economic Gain E(Penalty) = (1-p) * [(q|1-p) * Q + (r|1-p)* R + (s|1-p) *S] Where p = the perceived probability of successfully concealing the fraud (Opportunity) Where 1-p = the perceived probability of getting caught (q|1-p) = the probability of being prosecuted (r|1-p) = the probability of being fired but not prosecuted (s|1-p) = the probability of being slapped on the wrist Q, R, and S are consequences where Q > R > S -Financial consequences include legal costs, damage award, loss of future wages and decreased wages elsewhere, potential cost of moving
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© W.R. Knechel The Utility of Committing Fraud All Incentives: Committing Cognitive Relieving U( fraud ) = U[E(Net Gain)] U[Dissonance] + U [Pressure ]
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