Final answer:
No 2) fraud prevention programs do not always result in higher costs and lower net income compared to just detection. They can offer long-term savings and benefits that outweigh the initial costs. The effectiveness of these programs is often reflected in a positive benefit-cost ratio.
Step-by-step explanation:
The question relates to whether fraud prevention programs are always more costly than a strong system of fraud detection, and whether they result in lower net income. The simple answer is No. While it's true that there are costs associated with implementing fraud prevention programs, they can actually result in long-term savings and higher net income. As the cost of additional crime prevention rises, the goal should be to reduce crimes to the point where the benefits equal those costs.
Effective crime prevention can deter criminal activities or increase opportunity costs for potential criminals, thus reducing the incidence of crime. For instance, early childhood interventions that enhance cognitive skills have been shown to decrease crime substantially. The resulting social benefits often outweigh the costs involved in these programs, indicating a positive benefit-cost ratio. Moreover, practices like offering lower insurance rates for businesses that improve security measures can reduce fraud and its associated costs over time.
Deterrence approaches that raise the costs or probability of getting caught, like more street lighting or police body cameras, can also prevent crime effectively and serve as cost-efficient methods for reducing the fiscal impact of criminal activity. It's important to balance the costs of these measures against the benefits of reduced crime to society. In summary, the implementation of fraud prevention and deterrence strategies demonstrates that they can be cost-effective and may improve net income by reducing the incidence and impact of fraud.