Fraud Triangle Theory and Identification of Financial Fraud From China’s Listed Company

<p>The sustainable development of China’s economy stimulates the continuous increase in the number of listed companies, and the competition among them is also intensifying. Financial fraud is used to cover up the real operation of the company, which has a serious impact on the order of economic development. So, it is necessary to analyze the causes of financial fraud of listed companies, and we need to deal with the behavior from the root. Therefore, this article selects one of the typical cases in this field, Greencool incident, and combines with the fraud triangle theory to explore the essential causes of financial fraud, and puts forward relevant governance countermeasures, so as to reduce the occurrence of financial fraud.</p>

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Understanding the fraud theories and advancing with integrity model

Journal of Financial Crime ◽

10.1108/jfc-07-2021-0163 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Shefali Saluja ◽

Arun Aggarwal ◽

Amit Mittal

Keyword(s):

Theoretical Background ◽

Traditional Theory ◽

Second Phase ◽

Fraud Triangle ◽

Mice Model ◽

Corporate Fraud ◽

Content Type ◽

Fraud Theory ◽

Triangle Theory ◽

Major Factors

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.

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Fraud Triangle Theory: Calling for New Factors

Insight Journal ◽

10.24191/ij.v7i0.87 ◽

2021 ◽

Vol 7 ◽

pp. 54-64

Author(s):

Naqiah Awang ◽

Nur Syafiqah Hussin ◽

Fatin Adilah Razali ◽

Shafinaz Lyana Abu Talib

Keyword(s):

Business Environment ◽

Economic Downturn ◽

Fraud Triangle ◽

Risk Area ◽

Motivation Factors ◽

Detailed Evaluation ◽

Modern Business ◽

Prior Literature ◽

Triangle Theory ◽

New Generation

The famous financial scandal of Enron, WorldCom and 1 Malaysia Development Berhad has harmed the auditor’s reputation as the protector of shareholders’ rights. Auditors have done their part by conducting systematic audit procedures and “What Could Go Wrong” analysis in assessing the possible risk area to assist fraud detection in the client’s financial matters. However, fraud cases never seem to decline. Regardless of any safeguarding measures established, fraud incidents can just occur and be worsened by economic downturn and prolonged inflation especially after the pandemic ends. Additionally, the characteristic of the modern business environment, technology sophistication and new generation traits had challenged Cressey Fraud Triangle Theory on its validity and relevancy. Therefore, associating all these possible challenges into consideration, this study aims to review prior literature related to the evolution of Cressey fraud theory to propose a new insight in considering relevant motivation factors that drive fraud penetrations. From the review, the study discovered the need for a detailed evaluation and research on the essential fraud element in constructing an all-rounded fraud prevention mechanism.

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Learning Internal Controls from a Fraud Case at Bank of China

Issues in Accounting Education ◽

10.2308/iace-50177 ◽

2012 ◽

Vol 27 (4) ◽

pp. 1171-1192 ◽

Cited By ~ 8

Author(s):

Huong Ngo Higgins

Keyword(s):

Internal Control ◽

Banking Sector ◽

Business Students ◽

Internal Controls ◽

Fraud Triangle ◽

Bank Of China ◽

Recent Reform ◽

Chinese Banks ◽

Growing Economy ◽

Triangle Theory

ABSTRACT This case provides an opportunity to discuss principles of internal control, the process by which an entity's board of directors, management, and other personnel provide reasonable assurance that fraud and theft are prevented and detected. The case also facilitates discussion of the unique corporate governance and internal control environments in China, a fast-growing economy. Readers will be asked to apply the fraud triangle theory to identify internal control weaknesses and to design control activities for preventing fraud. The case is intended for beginning auditing students, but is also suitable for a more general audience such as accounting, management, and business students at the M.B.A. or undergraduate level. The case introduces Bank of China (BOC) against the backdrop of China's banking sector. It describes the proliferation of non-performing loans in Chinese banks, the failure to report these loans correctly, and the way in which these conditions create a climate where fraud and theft might be easily hidden. These problems and the need for internal controls become evident in the description of a major fraud scheme at BOC. After relating this scheme, the case concludes by reviewing recent reform initiatives to modernize internal controls in Chinese banks.

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Kecurangan Dalam Laporan Keuangan “Menguji Teori Froud Triangle”

JURNAL AKUNTANSI DAN PAJAK ◽

10.29040/jap.v19i1.241 ◽

2018 ◽

Vol 19 (1) ◽

pp. 77

Author(s):

Langgeng Prayitno Utomo

Keyword(s):

Logistic Regression ◽

Fraud Detection ◽

Financial Statements ◽

External Pressure ◽

Fraud Triangle ◽

Triangle Theory ◽

Fraudulent Financial Statements

This study aims to examine the factors that affect the fraudulent financial statements of the company. Fraud detection of financial statements using fraud triangle theory. Based on the theory of fraud triangle there are three factors: pressure, opportunity, and rationalization are used as parameters to detect fraud. The sample of this study used 44 companies in 3 years of observation, where the company is divided into companies that are indications of fraud and not by doing the analysis using the calculation of the underlying M-score, this study used logistic regression, the result that the indication of fraud in this study only can be obtained from external pressure factors on pressure variables and the effectiveness of monitoring on the opportunity variables, this study fails to establish influence in three factors at once ie pressure, opportunity, and rational

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Fraud prevention initiatives in the Nigerian public sector

Journal of Financial Crime ◽

10.1108/jfc-02-2015-0008 ◽

2018 ◽

Vol 25 (2) ◽

pp. 527-544 ◽

Cited By ~ 2

Author(s):

Rabiu Abdullahi ◽

Noorhayati Mansor

Keyword(s):

Public Sector ◽

Structural Equation ◽

Equation Modeling ◽

Control Mechanisms ◽

Fraud Triangle ◽

Fraud Prevention ◽

Content Type ◽

The Public ◽

The Government ◽

Triangle Theory

Purpose Detecting and preventing fraud are challenging and risky tasks, especially in a fast developing economy such as Nigeria. The efforts become crucial in the government sectors, as they involve public’s trust and resources. The purpose of this study is to examine the relationships between the fraud incidence and the elements of fraud triangle theory (FTT) with the aim of combating current fraud outrages in the Nigerian public sector. Design/methodology/approach A survey was conducted and 302 questionnaires were distributed to the staff of the departments of accounting, internal auditing and investigation of ten selected ministries, departments and agencies of Kano State, Nigeria. Structural equation modeling (SEM) was used to analyze the data. Findings The study reveals a significant relationship between three elements of FTT and fraud incidences in the Nigerian public sectors (p-value < 0.001 for pressure and opportunity and p-value = 0.024 for rationalization). Practical implications The findings of the study are useful for forensic accountants and the Nigerian anti-graft bodies to enhance existing control mechanisms in fraud prevention initiatives. The research also contributes to bridge the gap in academic theory and empirical study related to FTT. Social implications Fraud scandals can cause public’s frustration, damage the reputation and integrity of the ruling government and result in negative image of the public sector. Originality/value Accordingly, the study suggests a salary scale reform (SSR) in the Nigerian public sector and improvement in fringe benefits to increase employees’ standard of living. The study concludes with recommendations to enhance fraud awareness and training programs to the government employees.

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Peran Fraud Triangle dalam Mendeteksi Financial Statement Fraud di Perusahaan Perbankan ASEAN

E-Jurnal Akuntansi ◽

10.24843/eja.2021.v31.i03.p15 ◽

2021 ◽

Vol 31 (3) ◽

pp. 713

Author(s):

Yuliana Pertiwi Yuwono ◽

Maria Assumpta Evi Marlina

Keyword(s):

Earnings Management ◽

Financial Stability ◽

Sampling Technique ◽

Total Sample ◽

External Pressure ◽

Commercial Banking ◽

Financial Statement ◽

Fraud Triangle ◽

Financial Statement Fraud ◽

Triangle Theory

This research aims to determine the effect of fraud triangle theory toward Financial statement fraud. Financial statement fraud is proxied by earnings management. Population in this study is non-Islamic commercial banking companies listed on SGX, MYX, SET, PSE and IDX. The sampling technique used purposive sampling. The total sample in the study was 66 non-Islamic commercial banking companies. The data analysis method used is multiple linear regression. The research results proved that Financial targets and change of auditors had a positive effect on Financial statement fraud while external pressure had a negative effect on Financial statement fraud. Financial stability and ineffective monitoring had no effect on Financial statement fraud. This research can be used as a reference by investors, the public, government and users of other financial statement information in order to detect Financial statement fraud through the fraud triangle theory. Keywords: Financial statement fraud; Earnings Management; Fraud Triangle.

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The Dark Side of Environmental Sustainability in Projects: Unraveling Greenwashing Behaviors

Project Management Journal ◽

10.1177/87569728211042705 ◽

2021 ◽

pp. 875697282110427

Author(s):

Qinghua He ◽

Zilun Wang ◽

Ge Wang ◽

Jianxun Xie ◽

Zhen Chen

Keyword(s):

Environmental Sustainability ◽

Structural Equation ◽

Qualitative Comparative Analysis ◽

Dark Side ◽

Primary Data ◽

Equation Modeling ◽

Fraud Triangle ◽

Positive Effects ◽

Managerial Implications ◽

Triangle Theory

Greenwashing behaviors (GWBs) are positive environmental communications in combination with poor environmental performance. Using fraud triangle theory, this study investigated the effects of three types of factors (pressures, opportunities, and rationalizations) that shape contractor GWBs. Primary data from 586 respondents were analyzed using structural equation modeling (SEM) and fuzzy-set qualitative comparative analysis (fsQCA). The SEM results indicate positive effects for these factors with the exception of isomorphic pressures and reveal the mediating role of rationalization. The fsQCA results present three configurational models that trigger GWBs. Theoretical and managerial implications are provided that shed new light on facilitating environmental sustainability in projects.

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Analysis of employee and management fraud in Tanzania

Journal of Financial Crime ◽

10.1108/jfc-01-2018-0012 ◽

2019 ◽

Vol 26 (2) ◽

pp. 412-431

Author(s):

Omari Zuberi ◽

Siasa Issa Mzenzi

Keyword(s):

Public Awareness ◽

Descriptive Analysis ◽

Principal Component ◽

Financial Strain ◽

Fraud Triangle ◽

Public And Private ◽

Content Type ◽

Motivation Factors ◽

Management Fraud ◽

Triangle Theory

Purpose The study aims to explore specific motivations, rationalizations and opportunities that are involved in the occurrences of both employee and management fraud in the context of an emerging African country, Tanzania. It builds and extends from the fraud triangle theory. Design/methodology/approach A survey was developed and administered to 114 participants who had witnessed, had examined or had been involved in fraud resolutions. The participants included fraud examiners, business managers and owners, victims, auditors, lawyers, and law enforcement agents. The data collected were analysed using descriptive analysis, principal component analysis and correlation analysis. Findings The results revealed six motivation factors that incentivize employees and managers to engage in fraudulent behaviours. These are business financial strain, social incentives and pressure, greed, operating problems, internal pressures and malevolent work environment. In addition, fraudsters rationalized their behaviour through five significant neutralization techniques identified as social weighting, transferring of blame, denial of injury, attitude and prior fraud history. Lastly, victim organisations were identified to have three main fraud opportunities: poor control environment, inadequate control activities and circumstances that allowed collusive behaviour among fraudsters. Research limitations/implications While the study attempted to explore the motivations, opportunities and rationalizations from the perspectives of the fraud-fighting professionals and witnesses, their views and suggestions might be different from the actual known fraudsters or incarcerated individuals. Practical implications Business organisations, fraud-fighting professionals and general community must understand the factors behind fraud occurrences, so proper measures may be taken to limit the frequency and amount of fraud losses. Social implications Creation of public awareness and dialogue necessary for the prevention, fighting and deterrence against all forms of fraud. Originality/value Despite the occurrences of many scams in both public and private sectors, limited studies exist as to the triggers behind fraud occurrences in the context of the developing countries and whether these triggers are the same as in other contexts. This study is an attempt to fill this gap.

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