Fraud detection using fraud triangle theory: evidence from China

Abstract

Purpose

This study aims to explore the relationship between fraud triangle theory (FTT) and the accounting fraud phenomenon in all listed companies in China.

Design/methodology/approach

The CSMAR database is used as the sample, including 16,063 data of all listed companies in Shanghai and Shenzhen markets for the 2010–2020 period. The authors also use quantitative methods, such as regression analysis, to investigate the relationship between five variables (cover three elements of FTT) and fraud occurrence.

Findings

Results show that leverage and liquidity ratios positively affect fraud detection, whereas return on net equity, audit size and independent director percentage negatively affect fraud detection.

Originality/value

This study enriches theoretical research on the causes of accounting fraud in China and is of great significance to the sound development of China’s capital market.

Citation

Rahman, M.J. and Jie, X. (2024), "Fraud detection using fraud triangle theory: evidence from China", Journal of Financial Crime, Vol. 31 No. 1, pp. 101-118. https://doi.org/10.1108/JFC-09-2022-0219