True, SOX has led to Nortel and other corporations taking the approval of management-prepared financial statements more seriously, second guessing management on issues like revenue recognition and asset valuation where no such questioning would have occurred before SOX. But treating fraud prevention as merely monitoring compliance with Generally Accepted Accounting Principles (G.A.A.P.) fundamentally misses the point that "fraud artists" are, by definition, masters of avoiding or evading any set of rules that may be set up, and that the prevention, detection and deterrence of fraud is fundamentally a matter of corporate culture.

Like any group activity, corporate business is heavily influenced by group leaders and peer pressure. If those at the top of the corporate ladder are seen as tolerating, if not perpetrating, unethical behaviour, then those who look to them for guidance will draw the necessary lessons for their own personal conduct, giving them plenty of ammunition to rationalize their own improper behaviour. Excessive executive compensation for those at the top only adds fuel to this fire. When we add personal pressure in the form of unrealistic time or earning goals, substantial compensation and advancement based on individual and department targets, and the threat of termination based on a perceived lack of performance, then we have two of the three points of the fraud triangle, pressure to cheat along with reasons to rationalize such behaviour. This leaves management with the substantial cost of trying to remove the third element of the fraud triumvirate, the opportunity to perpetrate a fraud. Any attempt to prevent fraud through bolstering internal controls, segregation and rotation of duties, a system of checks and balances, and internal and external auditors is bound to be expensive and ultimately in vain where there is a pervasive culture that tolerates such misbehavior.

Because of the costs of fraud, including the costs to prevent