Cressey’s Fraud Triangle has been referenced in 8,584 studies and academic papers [1] and is a stalwart of training courses for accounting and audit practitioners and fraud…
Abstract
Purpose
Cressey’s Fraud Triangle has been referenced in 8,584 studies and academic papers [1] and is a stalwart of training courses for accounting and audit practitioners and fraud investigators. The Fraud Triangle has endured for three decades in the academic and practitioner worlds. This study aims to explore the origins of Cressey’s Fraud Triangle and challenge its practical value to a fraud investigator.
Design/methodology/approach
This study has developed from analysis of a targeted literature review carried out as part of a wider study into occupational fraud and corruption.
Findings
Cressey’s name is intrinsically linked to the Fraud Triangle, although he never used the expression during his lifetime. Two of the three motivational factors identified by Cressey (1953) were developed from the earlier work of Svend Riemer (1941), who it is suggested should have equal billing with Donald Cressey for the concepts that led to the creation of the Fraud Triangle.
Practical implications
The paper illustrates the limitations of Cressey’s Fraud Triangle for practitioners.
Originality/value
Many academics and researchers have either misunderstood Cressey’s role in the development of the Fraud Triangle or been unaware of its true origins. Although the pioneering work of Riemer is referenced in a 2014 study on the Fraud Triangle by Alexander Schuchter and Michael Levi, to the best of the authors’ knowledge, this paper is the first to identify the influence of Riemer on Cressey’s thinking and the development of the Fraud Triangle.
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Anastasia Cheliatsidou, Nikolaos Sariannidis, Alexandros Garefalakis, Jamel Azibi and Paschalis Kagias
Fraud omnipresent in the media, the corporate world and the academic literature has attracted a great deal of research interest. Fraud and its various types and forms have been…
Abstract
Purpose
Fraud omnipresent in the media, the corporate world and the academic literature has attracted a great deal of research interest. Fraud and its various types and forms have been characterized as significant contributing factors to the development of severe financial crises. Recurrent financial crimes in both the private and the public sectors remind us that fraud and its negative consequences paralyze economic entities all over the world. Understanding the multidimensional nature of fraud is key to prevent and detect it. This paper aims to examine the dominant fraud triangle model framework and its variants developed in the accounting literature to provide the etiology of fraud.
Design/methodology/approach
Having identified the fraud theory developed so far, we provide a theoretical framework for international fraud triangle.
Findings
Understanding the multidimensional nature of fraud is key to prevent and detect it. This paper examines the dominant fraud triangle model framework and its variants developed in the accounting literature to provide the etiology of fraud. Drawing on theoretical insights and useful criticism of the fraud triangle, this paper proposes an international fraud triangle model framework to help auditors, managers, regulators and academics in understanding fraud holistically in the private and public sector in a global context. The authors finally provide an overview of fraud in the Greek Context.
Originality/value
This paper proposes an international fraud triangle model framework.
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The purpose of this study is to examine the existing literature on the fraud triangle. The fraud triangle framework, popularized by Donald Cressey and W. Steve Albrecht, has been…
Abstract
Purpose
The purpose of this study is to examine the existing literature on the fraud triangle. The fraud triangle framework, popularized by Donald Cressey and W. Steve Albrecht, has been used to explain financial crimes since the 1940s. The theory includes that workplace financial crime and fraud occurs only when an offender has sufficient opportunity, pressure and rationalization to commit the crime. The fraud triangle has been empirically applied to the array of criminal behaviors and specific financial crimes and offenders internationally to determine if all three elements are necessary for the crimes to occur.
Design/methodology/approach
This systematic review summarized 33 empirical studies that have applied all three components of the fraud triangle to study financially criminal behavior committed by both corporations and individuals. The review included published and non-published papers and manuscripts from a variety of sources internationally.
Findings
Of the 33 studies included, 32 found support for at least one element of the fraud triangle and 27 found support for all three elements. Overall, these studies have shown that the fraud triangle has generally received support across different subjects, industries and countries.
Research limitations/implications
This research only examined papers using the “fraud triangle” term.
Originality/value
This paper systematically reviewed different types of studies internationally, concluding that the fraud triangle is largely valid internationally as an explanation for financial crimes.
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The purpose of this article, which is based on author's study, is to highlight the essential attributes of forensic accountants and to construct the forensic accountant…
Abstract
Purpose
The purpose of this article, which is based on author's study, is to highlight the essential attributes of forensic accountants and to construct the forensic accountant “blueprint” as a reference for forensic accounting education and training.
Design/methodology/approach
This study uses primary and secondary data on forensic accounting profession in Indonesia and the USA. Such data were collected by means of literature reviews, in-depth interviews, and a focus group discussion with a number of forensic accounting professionals in Indonesia and the USA.
Findings
The author establishes that the “problem-based” nature of forensic accounting requires a unique approach in producing forensic accountants compared to ordinary accountants. The essential attributes that a forensic accountant needs to possess are mentality, method, and experience. “Mentality” consists of elements such as ability to differentiate the right from the wrong, courage to stand up for what is right, ability to withstand pressures from the works, and puzzle solving mindsets. “Methods” refer to the understanding of the fraud investigation process such as fraud detection, evidences, investigation methods, and investigation report. “Experience” as the third attribute is gained primarily through involvement in fraud investigation process in which a forensic accountant utilizes his or her knowledge previously acquired through education and training.
Research limitations/implications
Forensic accounting is a problem oriented skill that may differ across countries. Due to the time and financial resource constraint, this study is limited only on two countries and a small number of respondents. For future study, more countries and respondents should be included in analysis to gain a more complete picture on what constitute a forensic accountant.
Practical implications
The results of this study contribute to the development of human resource in the forensic accounting profession. More specifically, they serve as a reference in the development of curriculum for forensic accounting education and training especially in Indonesia.
Originality/value
This paper sees forensic accountant skill development from the “demand” point of view by highlighting what that the profession expects from a forensic accountant.
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– The purpose of this paper is to examine the role of gender in white-collar crime. Directions for future research testing general and gender-specific theories are provided.
Abstract
Purpose
The purpose of this paper is to examine the role of gender in white-collar crime. Directions for future research testing general and gender-specific theories are provided.
Design/methodology/approach
Prior research is reviewed and critiques of general and gender-specific explanations for offending in the workplace context are advanced.
Findings
Gender-specific explanations in other offending contexts (e.g. violent crime) appear to be less applicable to the understanding of white-collar crime, a finding that lends support to general theory.
Practical implications
This paper provides an outline for future research testing criminological theory in organizational settings.
Originality/value
This paper represents a unique attempt to apply general and gender-specific theories to a variety of financial crimes in the context of organizations.
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E. Osei‐Tutu, E. Badu and D. Owusu‐Manu
While corruption has long been recognized as a destructive social problem, the subject has not yet been given much attention in the literature of the management of procurement of…
Abstract
Purpose
While corruption has long been recognized as a destructive social problem, the subject has not yet been given much attention in the literature of the management of procurement of infrastructure projects in Ghana. The purpose of this paper is to explore and discuss corruption practices inherent in public procurement of infrastructural projects in Ghana with the aim of identifying corruption related challenges that must be addressed in order to actualize the expected economic gains of infrastructural projects.
Design/methodology/approach
Drawing extensively on existing literature and published data, the methodology adopted for the paper consisted of multi‐stage critical review of pertinent literature; review of 2007 Annual Report of the Public Procurement Authority and review of the Public Procurement Act, 2003 (Act 663). The study assumes value‐laden axiological philosophy, where the values and experiences of the authors provided the basis for the discussion.
Findings
Conflict of interest, bribery, embezzlement, kickbacks, tender manipulation and fraud are observed corruption practices in the Ghanaian infrastructure projects delivery system. The severity of corruption practices have intensified the search for more innovative means of delivering infrastructure projects that will achieve value for money. In the pursuit to control corruption practices, this would require constitution of a sound procurement system and pro‐social equity policies that would foster good governance, corporate social responsibility, transparency, accountability, judicious public expenditure and national progress. The Public Procurement Act 2003 (Act 663) is observed to proffer solutions for these underlying constructs but not without challenges.
Research limitations/implications
The nature of the research is review and explanatory without any empirical analysis to support the discussions and thus the results cannot be generalized on a broader context of public procurement practice in Ghana.
Practical implications
Implementation of sound procurement performance measurements would be imperative in the bid to curb corruption practices. The paper suggested a number of business approaches to combat corrupt practices in Ghana, which are explained in terms of political, psychological, technical, operational and retaliatory measures. In this paper, it is proposed that knowledge about and debating corruption related issues is just as important to the modern public procurement as are the abilities to creatively and logically introduce monitoring systems when planning, executing and completing projects.
Originality/value
The work is novel providing meaningful insights into conceptual basis for a detailed empirical analysis. Being a pioneering study, further research tailored to compare the extent of corruption practices in various sectors of the economy of Ghana would be novel.
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Lum Çollaku, Arbana Sahiti Ramushi and Muhamet Aliu
This study aims to examine the relationship between selfishness, moral justification and intention to fraud among accounting certified professionals. It focuses on the role of…
Abstract
Purpose
This study aims to examine the relationship between selfishness, moral justification and intention to fraud among accounting certified professionals. It focuses on the role of moral justification in explaining the link between selfishness and intention to fraud.
Design/methodology/approach
Data were collected with the help of a structured questionnaire. The final sample includes 240 accounting certified professionals. To test the hypothesized model in this study, IBM AMOS ver26 was used to perform the structural equation modeling.
Findings
The results of this study show that selfishness has no direct impact on the intention to commit fraud. However, selfishness does have a positive impact on moral justification. Furthermore, the study found that moral justification mediates the relationship between selfishness and fraud intention.
Practical implications
This study provides important implications for accounting firms and other organizations and recommends that they implement the necessary practices to reduce the fraudulent intentions of certified accounting professionals while simultaneously reducing selfishness and moral justification.
Originality/value
This research is among the few studies in the accounting field that address the mediating role of moral justification in the relationship between selfishness and fraud intention among certified accounting professionals.
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John D. Finnerty, Shantaram Hegde and Chris B Malone
The purpose of this paper is to examine the hypothesis that a period of sustained supernormal firm performance (for up to five years before fraud commission) creates financial…
Abstract
Purpose
The purpose of this paper is to examine the hypothesis that a period of sustained supernormal firm performance (for up to five years before fraud commission) creates financial pressure on actors/agents so they have a propensity to behave fraudulently to keep the good times (apparently) rolling.
Design/methodology/approach
Applying the Fama and French (1993) three-factor model using a range of calendar time portfolio methodologies, the authors measure abnormal drifts in stock performance in periods up to five years before alleged fraud commission dates. The authors examine a sample of 561 US firms subject to enforcement actions initiated by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) over 1968-2009.
Findings
The authors find that sustained firm-specific positive stock price performance for up to five years followed by the almost inevitable adverse shock, which eventually brings the good times to an end, generally precedes corporate fraud. Fraud occurs when firm managers engage in misconduct in a misguided attempt to keep the good times (apparently) rolling despite the negative shock.
Research limitations/implications
The sample is restricted to firms with trading histories on the stock market prior to the misconduct, and to firms contained in the Federal Securities Regulation database of US firms subject to enforcement actions initiated by the SEC and the DOJ over 1968-2009.
Practical implications
The desire to keep the good times rolling appears to be a very important driver of fraudulent behavior, even after controlling for the executive compensation incentive effects and business cycle effects emphasized in prior studies. The robust findings of positive abnormal returns for up to five years preceding initial fraud commission suggest that regulators and investors would be well-advised to scrutinize the behavior of firms that exhibit surprisingly persistent superior performance over an extended period. If the financial results appear too good to be true, a closer examination might just reveal that they indeed are.
Social implications
While most investors generally like to see the “good times keep rolling” this pressure can create ethical dilemmas for managers.
Originality/value
Unlike most other papers in this area of the literature, which concentrate on the pre-fraud disclosure, the authors investigate the firm’s performance in the pre-fraud commission period. The authors find that the commission of the alleged fraud is preceded by a sustained period of surprisingly good performance of up to five years in length. The authors believe that the paper provides empirical evidence that supports the hypothesis that a period of sustained supernormal firm performance (for up to five years before fraud commission) creates financial pressure on actors/agents so they have a propensity to behave fraudulently to keep the good times (apparently) rolling.
This paper aims to add to the theoretical discussion of white-collar crime by introducing modern psychological decision-making literature and the potential effect on white-collar…
Abstract
Purpose
This paper aims to add to the theoretical discussion of white-collar crime by introducing modern psychological decision-making literature and the potential effect on white-collar offending.
Design/methodology/approach
Using a theoretical approach, literature on heuristics, innovation and stress, insight into why white-collar offenders decide to commit crime is posited.
Findings
The heuristics and strategies that people use to assist in decision-making process may inadvertently promote white-collar crime. For example, stress may inhibit white-collar offenders’ thinking, causing them to discount the risk of committing said offense; individuals may not challenge the success of carrying out a white-collar offense once it is considered; and generally, people will be more optimistic in considering their success of not getting caught.
Originality/value
Currently, the study of white-collar crime is discussed largely in the context of sociological factors. Current psychological theories have considerable explanatory power in understanding why white-collar offenders commit their crimes.