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Criteria of Control (CoCo)

Boni, William C., and Kovacich, Gerald L. (1999). I-way rob- a computer, then the computer for several lamps, then the
bery: Crime on the Internet. Boston: Butterworth/Heinemann. lamps for the desired eyeglasses.
Boni, William C., and Kovacich, Gerald L. (1999). Netspionage: The existence of money means that individuals do
The global threat to information. Boston: Butterworth/Heine- not need to hold a diverse collection of goods as an
mann.
exchange inventory. Money allows them to specialize in
Callahan, D. (2004). The cheating culture: Why more Americans any area in which they have a comparative advantage and
are going wrong to get ahead. New York: Harcourt.
to receive money payments for their labor. Money can
Coleman, J. W. (2002). The criminal elite: Understanding white-
collar crime (6th ed.). New York: Worth. then be exchanged for the fruits of other people’s labor.
The use of money as a medium of exchange permits indi-
Comer, M. J. (1998). Corporate fraud (3rd ed.). Brookfield, VT:
Gower. viduals to specialize and promotes the economic efficien-
cies that result from specialization.
Hunter, R. (2002). World without secrets: Business, crime, and pri-
vacy in the age of ubiquitous computing. New York: Wiley. In the same way that money facilitates exchange in a
Loewy, A. H. (2004). Criminal law in a nutshell (4th ed.). St. single economy, exchange of currencies facilitates the
Paul, MN: Thomson/West. exchange of goods and services across the boundaries of
Mann, R. A., and Roberts, B. S. (2005). Essentials of business law countries. For instance, when you buy a foreign product,
and the regulation of business (8th ed.). Mason, OH: Thom- such as a Japanese car, you have dollars with which to pay
son/South-Western/West. the Japanese carmaker. The Japanese carmaker, however,
Rezaee, Zabihollah (2002). Financial statement fraud: Prevention cannot pay workers in dollars. The workers are Japanese,
and detection. New York: Wiley. they live in Japan, and they need Japanese yen to buy
Silverstone, Howard, and Sheetz, Michael (2004). Forensic goods and services in that country. There must be some
accounting and fraud investigation for non-experts. Hoboken, way of exchanging dollars for the yen that the carmaker
NJ: Wiley. will accept in order to facilitate trade. That exchange
Twomey, David P., Jennings, Marianne Moody, and Fox, Ivan occurs in a foreign-exchange market, which in this case
(2002). Anderson’s business law and the legal environment specializes in exchanging yen for dollars.
(18th ed.). Mason, OH: West/Thomson Learning.
The particular exchange rate between yen and dollars
that would prevail depends on the current demand for
Allen D. Truell and supply of yen and dollars (see Figure 1). If one cent
Michael Milbier per yen is the equilibrium price of yen, then that is the
foreign-exchange rate determined by the current demand
for and supply of yen in the foreign-exchange market. A
person going to the foreign-exchange market would need
CRITERIA OF CONTROL one hundred yen (1/.01) to buy one dollar or one dollar
(COCO) to buy one hundred yen.
SEE Internal Control Systems
SUPPLY AND DEMAND FOR
FOREIGN CURRENCY
Suppose you want to buy a Japanese car. To do so, you
CURRENCY EXCHANGE must have Japanese yen. You go to the foreign-exchange
Money is any medium that is universally accepted in an market or your American bank. Your desire to purchase
economy by sellers of goods and services as payment and the Japanese car causes you to offer supply dollars to the
by creditors as payment for debts. Money serves as a foreign-exchange market. Your demand for Japanese yen
medium of exchange; indeed, without money, we would is equivalent to your supply of U.S. dollars to the foreign-
have to resort to barter in doing business. Barter is simply exchange market. Indeed, every U.S. import leads to a
a direct exchange of goods and services for other goods supply of dollars and a demand for some foreign cur-
and services. For instance, a wheat farmer who wants a rency. Likewise, every U.S. export leads to a demand for
pair of eyeglasses must find an optician who, at exactly the dollars and a supply of some foreign currency by the pur-
same time, wants a dozen bushels of wheat; that is, there chaser.
must be a double coincidence of wants, and the elements For the moment assume that only two goods are
of the desired trade must be of equal value. If there is not being traded—Japanese cars and U.S. steel. Thus, the
a double coincidence of wants, the wheat farmer must go U.S. demand for Japanese cars creates a supply of dollars
through several trades in order to obtain the desired eye- and a demand for Japanese yen in the foreign-exchange
glasses; for example, this might involve trading wheat for market. Similarly, the Japanese demand for U.S. steel cre-

182 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION