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In: Accounting

Should the False Claims Act and the Dodd-Frank Act be expanded to cover all frauds? Why...

Should the False Claims Act and the Dodd-Frank Act be expanded to cover all frauds? Why or why not? What are the drawbacks?

Solutions

Expert Solution

Yes, the False Claims Act and the Dodd-Frank Act must be expanded to include all frauds. The False Claims Act explicitly does not include the tax fraud. There is a separate whistleblower law by IRS which provides for whistleblower awards. Moreover it excludes the government inefficiency or mismanagement. The government may lose millions of dollars each year through mismanagement and waste, bureaucratic inefficiencies, as well as the mismanagement and waste of outsiders (such as government contractors). The False Claims Act does not cover any remedy for inefficiencies or mismanagement that does not rise to the fraud level.

The Dodd-Frank Act included new provisions for whistleblower that are applicable to securities violations, bribery allegations, and accounting fraud raised by people against SEC- and CFTC-reporting companies. The main drawback is that it places increased regulatory requirements on lenders and preventing the ability of consumer to get personal as well as small business loans. It also created a lack of liquidity in the market.


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