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Article
Publication date: 1 December 2021

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…

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.

Details

Journal of Money Laundering Control, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 2 June 2021

Peter Tickner and Mark Button

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.

Details

Journal of Financial Crime, vol. 28 no. 3
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 6 July 2015

Grace Mui and Jennifer Mailley

– This paper aims to propose the application of the Crime Triangle of Routine Activity Theory to fraud events as a complement to the universally accepted Fraud Triangle.

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3569

Abstract

Purpose

This paper aims to propose the application of the Crime Triangle of Routine Activity Theory to fraud events as a complement to the universally accepted Fraud Triangle.

Design/methodology/approach

The application of the Crime Triangle is illustrated using scenarios of asset misappropriations by type of perpetrator: external perpetrator, employee, management and the board and its governing bodies.

Findings

The Crime Triangle complements the Fraud Triangle’s perpetrator-centric focus by examining the environment where fraud occurs and the relevant parties that play their role in preventing fraud or not playing their role, and thus, allowing the occurrence of fraud. Applying both triangles to a fraud event provides a comprehensive view of the fraud event.

Research limitations/implications

The scenarios are limited to asset misappropriations with one perpetrator. Future research can apply both triangles to different types of fraud and cases where perpetrators collude to commit fraud.

Practical implications

This paper maps the Crime Triangle to the Fraud Triangle to provide forensic accounting practitioners and researchers with a comprehensive perspective of a fraud event. This comprehensive perspective of fraud is the starting point to designing fraud risk management strategies that address both the perpetrator and the environment where the fraud event occurs.

Originality/value

This paper is the first to propose the application of the established Crime Triangle environmental criminology theory as a complement to the Fraud Triangle to obtain a comprehensive perspective of a fraud event.

Details

Accounting Research Journal, vol. 28 no. 1
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 15 January 2020

Emily M. Homer

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…

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1458

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.

Details

Journal of Financial Crime, vol. 27 no. 1
Type: Research Article
ISSN: 1359-0790

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Content available
Article
Publication date: 1 May 2020

John Richard Kurpierz and Ken Smith

The purpose of this paper is to show a significant overlap in the models accounting research uses for fraud and the models other research disciplines use for greenwashing…

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6696

Abstract

Purpose

The purpose of this paper is to show a significant overlap in the models accounting research uses for fraud and the models other research disciplines use for greenwashing, and show how researchers and policymakers interested in the application of effective sustainability policy can draw from fraud accounting literature to better understand, and therefore, combat greenwashing. This is illustrated by showing multi-actor information-asymmetry models from other branches of accounting literature and synthesizing them with the fraud triangle model to suggest new avenues for reducing greenwashing and strengthening corporate social responsibility (CSR).

Design/methodology/approach

This paper reviews the current literature surrounding the greenwashing aspect of corporate camouflage compares the legal and technical definitions of fraud and synthesizes a new variant fraud triangle that more usefully describes greenwashing.

Findings

This paper is able to show that other areas of accounting research in North America have already tackled similar systems of multiple actors in an information-asymmetric environment and that a recurring trait is the emergence of a more robust reporting system. CSR reporting is currently in the process of emerging and could develop more swiftly by copying extant fraud-fighting tools. This is particularly salient given the increasing amount of liability legal regimes are giving to both sustainability activities and sustainability reporting from firms, as evidenced in both guidelines and scandals over the past decade.

Research limitations/implications

Sustainability reporting is not unique in comprising a large number of interrelated entities with non-financial information asymmetry between actors. Previous researchers have encountered similar situations in government accounting and public administration and developed network models to study these relationships as a result. In government accounting, this led to the development both of better diagnostic tools for further research and better models for local governments to use to prevent fraud and malfeasance. This paper suggests that using such research methods in the area of CSR will allow for the development of similarly-useful tools and models.

Practical implications

Visualizing greenwashing as a form of fraud allows policymakers to use tools from the fraud-fighting literature to improve CSR reporting and produce a more robust regime in the future. As governments increasingly seek to respond effectively to material misstatements with an intent to deceive in sustainability reports, understanding the underlying information asymmetry as it is found in other private-public interfaces is critical. Similarly, researchers can analyze CSR reporting through the lens of fraud researchers to gain novel insights into how information asymmetry in CSR reporting works.

Social implications

Greenwashing is not traditionally seen as a form of fraudulent reporting, even though it often meets the same technical test used to determine fraudulent reporting. The realization that the two are structurally similar allows the authors to better understand how CSR reporting works and how CSR reporting can be falsified. By understanding the latter, governments, firms and non-governmental organizations (NGOs) can develop tools to prevent CSR reporting from being falsified.

Originality/value

This paper suggests a new suite of tools with which to study greenwashing, and with which to fight greenwashing in a sustainability accounting context.

Details

Sustainability Accounting, Management and Policy Journal, vol. 11 no. 6
Type: Research Article
ISSN: 2040-8021

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Book part
Publication date: 10 February 2020

Ali Altug Bicer

The aim of this study is to analyze the relationship between personality traits and students’ cheating behavior using the five-factor personality model and the fraud

Abstract

The aim of this study is to analyze the relationship between personality traits and students’ cheating behavior using the five-factor personality model and the fraud triangle factors. This chapter develops an evidential study that has the goal to determine the relationship between the students’ cheating behavior and personality traits by using fraud triangle factors. In this context, 251 surveys have been conducted on students of a foundation university located in Istanbul. As means of data collection, NEO – Five Factor Inventory and Academic Fraud Risk Factors have been used. Data have been analyzed by regression tree analysis. Risk and classification tables have been created before starting the study with a decision tree in which classification and regression trees algorithms were implemented. The results reveal that rationalization behind the cheating is the most important reason for students to copy and people who believed that they were extremely appropriate to copy were responsible ones when analyzed in terms of their personality traits. The results of this study contribute to the literature by discovering the characteristics of those who admit academic dishonesty and underlie the factors or predispositions for engaging in this behavior. For sure, three factors of the fraud triangle may have different levels of significance in this study; in addition, pressure is not associated with the cheating behavior.

Details

Contemporary Issues in Audit Management and Forensic Accounting
Type: Book
ISBN: 978-1-83867-636-0

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Article
Publication date: 3 April 2018

Kuldeep Kumar, Sukanto Bhattacharya and Richard Hicks

Recent research has confirmed an underlying economic logic that connects each of the three vertices of the “fraud triangle” – a fundamental criminological model of factors…

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1162

Abstract

Purpose

Recent research has confirmed an underlying economic logic that connects each of the three vertices of the “fraud triangle” – a fundamental criminological model of factors driving occupational fraud. It is postulated that in the presence of economic motivation and opportunity (the first two vertices of the fraud triangle), the likelihood of an occupational fraud happening in an organization increases substantially if the overall organization culture is perceived as being slack toward fraud as it helps potential fraudsters in rationalizing their actions (rationalization being the third vertex of the fraud triangle). This paper aims to offer a viable approach for collecting and processing of data to identify and operationalize the key factors underlying employee perception of organization culture toward occupational frauds.

Design/methodology/approach

This paper reports and analyses the results of a pilot study conducted using a convenience sampling approach to identify and operationalize the key factors underlying employee perception of organization culture with respect to occupational frauds. Given a very small sample size, a numerical testing technique based on the binomial distribution has been applied to test for significance of the proportion of respondents who agree that a lenient organizational culture toward fraud can create a rationalization for fraud.

Findings

The null hypothesis assumed no difference in the population proportions between those who agree and those who disagree with the view that a lenient organizational culture toward fraud can create a rationalization for fraud. Based on the results of the numerical test, the null hypothesis is rejected in favor of the alternative that the population proportion of those who agree with the stated view in fact exceeded the proportion of those who disagreed.

Research limitations/implications

The obvious limitation is the very small size of the sample obtained because of an extremely low rate of response to the survey questionnaires. However, while of course a much bigger data set needs to be collected to develop a generalizable prediction model, the small sample was enough for the purpose of a pilot study.

Practical implications

This paper makes two distinct practical contributions. First, it posits a viable empirical research plan for identifying, collecting and processing the right data to identify and operationalize the key underlying factors that capture an employee’s perception of organizational culture toward fraud as a basis for rationalizing an act of fraud. Second, it demonstrates via a small-scale pilot study that a more broad-based survey can indeed prove to be extremely useful in collating the sort of data that is needed to develop a computational model for predicting the likelihood of occupational fraud in any organization.

Originality/value

This paper provides a viable framework which empirical researchers can follow to test some of the latest advances in the “fraud triangle” theory. It outlines a systematic and focused data collection method via a well-designed questionnaire that is effectively applicable to future surveys that are scaled up to collect data at a nationwide level.

Details

Pacific Accounting Review, vol. 30 no. 2
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 10 August 2015

Clinton Free

This article aims to review popular frameworks used to examine fraud and earmarks three areas where there is considerable scope for academic research to guide and inform…

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2856

Abstract

Purpose

This article aims to review popular frameworks used to examine fraud and earmarks three areas where there is considerable scope for academic research to guide and inform important debates within organisations and regulatory bodies.

Design/methodology/approach

The article reviews published fraud research in the fields of auditing and forensic accounting, focusing on the development of the dominant framework in accounting and fraud examination, the fraud triangle. From this review, specific avenues for future research are identified.

Findings

Three under-researched issues are identified: rationalisation of fraudulent behaviours by offenders; the nature of collusion in fraud; and regulatory attempts to promote whistle-blowing. These topics highlight the perspective of those directly involved in fraud and draw together issues that have interested researchers in other disciplines for decades with matters that are at the heart of contemporary financial management across the globe.

Originality/value

In spite of the profound economic and reputational impact of fraud, the research in accounting remains fragmented and emergent. This review identifies avenues offering scope to bridge the divide between academia and practice.

Details

Meditari Accountancy Research, vol. 23 no. 2
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 13 October 2021

Paschalis Kagias, Anastasia Cheliatsidou, Alexandros Garefalakis, Jamel Azibi and Nikolaos Sariannidis

In recent years, Public Accountability and Integrity have been matters of growing attention, both in the public and private sector, as citizens demand value for money…

Abstract

Purpose

In recent years, Public Accountability and Integrity have been matters of growing attention, both in the public and private sector, as citizens demand value for money entrusted to the governments through their taxes. In addition, in many countries, after the recent recession, government budgets and corporate returns have been reduced. Many corporate scandals have occasionally become known and have had a great impact on confidence in the market. Even worse, after the pandemic of COVID-19, «bare and exacerbated massive preexisting problems in the world’s economic, social and security order, threatens to push up to 100 million people into extreme poverty in 2020, struck at a time of dwindling trust in representative governance» (UNDP, 2020). The funds of organizations in the private and public sector have been shrinking, whereas the situational pressures of fraud are increased. In this context, Dorris, President and CEO of the ACFE warns for explosion of fraud in the coming years and reminds that during the 2008 economic, companies cut-off, non-revenue generating activities, such as the internal audit and the compliance departments leaving them exposed to fraud. Therefore, organizations have to do more with less. The purpose of this paper is to present the development of the fraud theory on the management’s perspective aiming to contribute to the efficient development of anti-fraud mechanisms

Design/methodology/approach

Having identified the fraud theory developed so far, we provide a framework for the fraud risk management.

Findings

This paper incorporates cost/benefits considerations, practical considerations and empirical evidence on fraud.

Originality/value

This paper provides valuable information to enable the management, who has the primary responsibility to prevent and detect fraud, to disclaim responsibility by broadening their understanding of fraud theory.

Details

Journal of Financial Crime, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 25 August 2021

Shefali Saluja, Arun Aggarwal and Amit Mittal

The fraud landscape talks about the existence of fraudulent activities and can be assessed with the help of fraud literature. Taking this into consideration, this paper…

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207

Abstract

Purpose

The fraud landscape talks about the existence of fraudulent activities and can be assessed with the help of fraud literature. Taking this into consideration, this paper qualitatively revisits the famous fraud triangle theory developed by Donald R. Cressey (1950) which is the most traditional theory to detect a fraud. This paper aims to discuss various fraud models that have been extensions to fraud triangle theory and reviews the factors that drive a corporate fraud. This study is divided into two phases. The first phases discuss the various theories which have been developed to detect and prevent corporate frauds in organisations, and in the second phase the authors recognize “integrity” as a new extension to the basic fraud theory. The integrity model has been introduced as “fraud square” contributing to the development of fraud theory. Integrity plays a very important role in detecting corporate frauds, and this paper will act as a theoretical benchmark for future references. The implication of this study would help future researchers, academicians and practitioners to understand the fourth element of the fraud theory and would help improve the professional standards of organisations and regulators.

Design/methodology/approach

This paper revisits the literature in detail and reviews the most acknowledged models to explain “why people commit frauds” – the fraud triangle, fraud scale, the fraud diamond, the ABC model, the MICE model and the SCORE model. The authors contend that the traditional models need to be modernized to acclimate to the current developments in the rapidly increasing fraud incidents, both in occurrence and seriousness. Additionally, this paper builds on theoretical background to generate new model so as to improve the understanding behind the major factors which lead to commitment of frauds.

Findings

The authors identify a major element – integrity – in the research. As per ACFE 2020, “There are more than 3.3 billion people in the global workforce, half of them takes illegal use of gains from the organisation and some are discipled with integrity who does not cause any harm to the organisation.” To prevent fraud, integrity plays a very important role in organisations (Bakri et al., 2017). It has been found that individuals with less integrity are basically specified to a greater level of mismanagement. The organisations that have worked with integrity will improve performance at work and will always promote the best employees to work with less supervision.

Originality/value

This paper develops the integrity model to contribute to the development of fraud theory by identifying the key factors that play a major role in whether fraud will actually occur and acting as a theoretical benchmark for all future reference.

Details

Journal of Financial Crime, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1359-0790

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