scholarly journals Integrating Religiosity into Fraud Triangle Theory: Empirical Findings from Enforcement Officers

2019 ◽  
Author(s):  
Jamaliah Said ◽  
Salsabila Asry ◽  
Marhamah Rafidi ◽  
Rawia Rida Obaid ◽  
Md. Mahmudul Alam
Keyword(s):  
Internal Control ◽  
Local Authority ◽  
Fraud Triangle ◽  
Public Officials ◽  
Huge Amount ◽  
New Model ◽  
Fraud Risk ◽  
Financial Pressure ◽  
Triangle Theory ◽  
Employee Fraud

Recently, employee-fraud has drawn extensive attention due to huge amount of losses of various organizations. This study developed a new model of fraud risk by integrating new elements into a fraud triangle theory. This study simultaneously analyzed religiosity and the three elements of fraud risk factors of employee fraud committed by low and mid-level public officials. The data collected from 120 enforcement officers indicated that religiosity is negatively related to employee fraud. By contrast, all the three elements of fraud triangle theory, namely, pressure, opportunity, and rationalization, are positively related to employee fraud. These results imply that strong religiosity is crucial to mitigate employee fraud. To minimize employee fraud, the opportunity to commit such fraud should be reduced through strong internal control, reduction of negative rationalization, and employee financial pressure. This study contributes to the literature by introducing a new model on employee-fraud occurrence that is not extensively discussed, particularly in the context of local authority in developing countries.

scholarly journals Deliberation of Fraud Triangle Theory: A Comparison among Public and Private Commercial Banks of Sindh, Pakistan

2020 ◽  
Vol V (I) ◽  
pp. 336-348
Author(s):  
Vivek Anand ◽  
Muhammad Qasim Nizamani ◽  
Farheen Qasim Nizamani
Keyword(s):  
Internal Control ◽  
Commercial Banks ◽  
Primary Source ◽  
Fraud Triangle ◽  
Public And Private ◽  
Financial Pressure ◽  
Private And Public ◽  
Triangle Theory ◽  
Public Banks ◽  
Public And Private Sector

The research has been conducted to apply the most fundamental concept of fraud triangle theory, introduced by Donald Cressey's in 1950-53, to private and public commercial banks of Sindh, Pakistan. According to this theory, Donald Cressey identified that when three-component/factor i-e pressure, opportunity, and rationalization, comes into an individual's life, he is very likely to commit fraud. Eight different hypotheses are drawn for this study to test the elements of the fraud triangle in public and private sector banks. The study adopted a primary source of data collection, with a sample size of 600 distributed to respondents of the two largest bank of Pakistan, i-e, the National Bank of Pakistan and Habib Bank Limited. The statistical Mann-Whitney U-Test applied to test the hypotheses. The results of the study disclosed that the employees in public sector banks in Sindh, facing more financial pressure, the internal control of public banks is also week; hence fraudsters find more opportunities to commit fraud and the employees working in public banks also behave rationalization for their illicit activities.

scholarly journals Integrating Ethical Values into Fraud Triangle Theory in Assessing Employee Fraud: Evidence from the Malaysian Banking Industry

2020 ◽  
Author(s):  
Jamaliah Said ◽  
Md. Mahmudul Alam ◽  
Masitah Ramli ◽  
Marhamah Rafidi
Keyword(s):  
Developing Countries ◽  
Internal Control ◽  
Banking Industry ◽  
Primary Data ◽  
Fraud Triangle ◽  
Ethical Values ◽  
Triangle Theory ◽  
Employee Fraud

This study attempts to integrate ethical values into the fraud triangle theory in the context of Malaysian banking industry. Primary data were collected through the survey of 108 questionnaires administered to the employees of the top three largest banks in Malaysia. The findings revealed that ethical values were negatively related to employee fraud, and two elements of fraud triangle theory, namely, opportunity and rationalization, were positively related to employee fraud. This implies that high ethical value is crucial to mitigate employee fraud. To minimize employee fraud, the banking industry should reduce opportunities and employee negative rationalization through strong internal control. This study contributes to literature on the occurrences of employee fraud, which is not widely discussed, especially in the context of the banking industry in developing countries.

The use of internal control systems and codes of conduct as anti-corruption practices: evidence from Vietnamese firms

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ngoc T.B. Le ◽  
Lien T.P. Vu ◽  
Thang V. Nguyen
Keyword(s):  
Control Systems ◽  
Internal Control ◽  
Codes Of Conduct ◽  
Ordinary Least Squares ◽  
Fraud Triangle ◽  
Public Officials ◽  
Cross Sectional ◽  
Specific Element ◽  
Content Type ◽  
Triangle Theory

PurposeDrawing from fraud triangle theory, the purpose of this paper is to examine whether the use of internal control systems and codes of conduct, as a specific element of internal control, helps firms to reduce law violations and bribery payments to public officials.Design/methodology/approachThe study is based on survey data of Vietnamese firms, conducted between September and December 2018. The authors run logistic and ordinary least squares regressions to test the hypotheses.FindingsThe study showed that the use of internal control systems has a negative and significant relationship with law violation but not with bribes paid to public officials. By contrast, the use of codes of conduct appears to reduce bribe payments but not law violations.Research limitations/implicationsCross-sectional data do not allow us to confirm causal relationships. The self-reported measures of the use of codes of conduct and internal control systems may suffer from social desirability biases and should be further validated with different samples of firms. Finally, the relatively modest number of firms that participated in the survey raises a concern of sample representativeness.Practical implicationsFor businesses, the application of codes of conduct and internal control systems enhances the reliability and certainty of the firm's operations as well as its integrity, contributing to the firm's long-term development. For policymakers, encouraging businesses to use internal control systems and codes of conduct would contribute meaningfully to the anti-corruption effort.Originality/valueBusinesses in emerging economies face a dilemma of how to participate in an anti-corruption agenda while staying profitable. This study shows that the use of internal control systems and codes of conduct would serve both purposes, contributing to businesses' sustainable development.

Internal control and employees’ occupational fraud on expenditure claims

2018 ◽  
Vol 25 (3) ◽  
pp. 891-906 ◽  
Author(s):  
Anuar Nawawi ◽  
Ahmad Saiful Azlin Puteh Salin
Keyword(s):  
Internal Control ◽  
Working Environment ◽  
Fraud Triangle ◽  
Content Type ◽  
Study Approach ◽  
Occupational Fraud ◽  
Financial Pressure ◽  
Culture Influence ◽  
Employees Satisfaction ◽  
Triangle Theory

Purpose The purpose of this study is to investigate the weaknesses of internal control in expenditure claim procedure and to identify the opinions of employees regarding an occupational fraud. This study also attempts to examine the most popular occupational fraud committed by the employee and whether a company’s working environment contributed to the fraud. Design/methodology/approach A case study approach was adopted to investigate and analyse the weaknesses of the internal control and occupational fraud incidents. A mixed method of data collection, specifically, survey questionnaire and document analysis were used. Findings This study found that the internal control of the expenditure claim procedure was weak and needed improvement. This study also found that a strong internal control and a better remuneration paid to the employees could reduce the risk of the occupational fraud committed in the company. In terms of fraud types, this study discovered that claims on mileage, followed by petrol, accommodation and suppliers’ invoice were the most popular occupational frauds committed by the employees. Finally, employee dissatisfaction and poor working-environment culture influence occupational fraud’s level in the organizations. Research limitations/implications The results provide further confirmation of the fraud triangle theory on the causes of fraud, i.e. opportunity because of a weak internal control and financial pressure because of low and non-standardized salary. This study, however, was conducted only on one company. Practical implications This study provides some recommendations to overcome the weak internal control and improve employees’ satisfaction which lead to better working environment. Thus, opportunities for fraud in the company can be reduced. Originality/value This study is original, as it focusses specifically on occupational fraud which is rare in fraud literature, particularly for a study that is conducted in developing markets like Malaysia. It also has examined various related sensitive documents and reports of employee frauds that are generally difficult to be accessed by researchers.

Learning Internal Controls from a Fraud Case at Bank of China

2012 ◽  
Vol 27 (4) ◽  
pp. 1171-1192 ◽  
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.

scholarly journals Pengaruh Pengendalian Internal, Budaya Organisasi, dan Moralitas pada Kecenderungan Kecurangan (Fraud) di LPD se-Kabupaten Gianyar

2018 ◽  
pp. 2155
Author(s):  
I Putu Aditya Prastika Eka Putra ◽  
Made Yenni Latrini
Keyword(s):  
Organizational Culture ◽  
Internal Control ◽  
Random Sampling ◽  
Stratified Random Sampling ◽  
Fraud Triangle ◽  
Cultural Organization ◽  
Analysis Technique ◽  
Linear Regression Technique ◽  
Triangle Theory ◽  
Questionnaire Method

This research aimed to determine the effect of internal control, organizational culture, and morality to fraud tendency. The theory used in this research are Fraud Triangle Theory and Agency Theory. The population in this study is the head of LPDs in Gianyar regency. This research using proportionate stratified random sampling. The samples were taken are 73 head of LPDs. The data collectment is done by questionnaire method. The data analysis technique used in this research is multiple linear regression technique. The results of this research showed that internal control, cultural organization and morality have negative affect on fraud tendency in LPDs in Gianyar regency. Keywords:  Internal Control, Organizational Culture, Morality, Fraud Tendency

Fraud Risk Factors of Cressey’s Fraud Triangle Theory: Evidence From Korea

2017 ◽  
Vol 32 (2) ◽  
pp. 291-314
Author(s):  
Bok－Hyun Cho ◽  
◽  
Young－Gyu Ahn ◽  
Keyword(s):  
Risk Factors ◽  
Fraud Triangle ◽  
Fraud Risk ◽  
Triangle Theory

scholarly journals The Effect Of Financial Health Levels To The Indication Of Financial Statement Fraud In Transportation Sector

Riset ◽  
2021 ◽  
Vol 3 (1) ◽  
pp. 449-465
Author(s):  
Sharon Callista Hanjaya ◽  
Sylvia Fettry
Keyword(s):  
Public Transportation ◽  
Financial Statement ◽  
Measurement Tool ◽  
Fraud Triangle ◽  
Financial Health ◽  
Transportation Industry ◽  
Financial Statement Fraud ◽  
Financial Pressure ◽  
Triangle Theory ◽  
A Company

Because of app-based transportation, traditional transportation companies are being abandoned because in terms of practicality, they are less accessible to various groups of people. Therefore, traditional transportation companies compete difficultly and have financial pressure. One example of financial pressure is poor financial health. Based on the Fraud Triangle theory, it is said that if a company is under pressure, the possibility of committing fraud will increase. This study is conducted to find empirical evidence whether the level of financial health could affect the possibility of financial statement fraud. This study is expected to provide knowledge to investors and potential investors how to use the Altman's Z-Score analysis method as a measuring tool for financial health level and the Beneish M-Score as a financial statement fraud red flag measurement tool, in order to avoid fraud in the future. The research method used is the method of causality. The data collected is secondary quantitative data in the form of financial statements of companies in the land public transportation industry for the period of year 2015 until 2019. Descriptive and verificative analysis will be done on these data. After conducting the analysis, it can be concluded that the level of financial health has a significant effect on financial statement fraud indications. But there are many other factors that can explain changes in the likelihood of a company committing financial statement fraud such as opportunity, rationalization and various other types of pressure.

Internal controls and fraud – empirical evidence from oil and gas company

2016 ◽  
Vol 23 (4) ◽  
pp. 1154-1168 ◽  
Author(s):  
Khairul Mizan Zakaria ◽  
Anuar Nawawi ◽  
Ahmad Saiful Azlin Puteh Salin
Keyword(s):  
Internal Control ◽  
Oil And Gas ◽  
Direct Access ◽  
Fraud Triangle ◽  
Contributing Factors ◽  
Academic Journal ◽  
Content Type ◽  
Study Approach ◽  
Internal Control Weaknesses ◽  
Triangle Theory

Purpose The purpose of this study is to examine the type of internal control weaknesses and its impact that leads to fraud activities in an oil and gas company, which is rarely found in empirical research. Design/methodology/approach A case study approach was taken to investigate and analyse the fraud incidents to the deepest understanding. A mixed method of data collection, specifically document analysis and interviews, was used. Findings The study found that internal control weaknesses can be major contributing factors for fraud to be committed. Poor supervision and improper documentation process provide opportunity to misappropriate the assets, worst off if it includes several people that cooperate to conduct those illegal malpractices. Research limitations/implications The results provide further confirmation of the fraud triangle theory on the causes of the fraud, i.e. opportunity because of weak internal control. It also validates with many prior studies conducted by global professional firms such as KPMG, PricewaterhouseCoopers and Association of Certified Fraud Examiners on fraud and its related causes and implications. This study, however, was conducted on only one company with limited number of interviews. Practical implications This study provides some recommendations to improve weak internal control, which in turn will reduce opportunities of fraud committed in the company. Originality/value This study is original, as it focuses on a company that operates in the highly specialized industry, i.e. oil and gas, which is rare in fraud literature, particularly in developing markets such as Malaysia. It has examined various documents and reports of employee fraud that are generally difficult to be accessed by researchers to be finally published in an academic journal. The findings of this study are inferred from direct access of company documents that are private and confidential.

Antecedents and consequences of staff related fraud in the Ghanaian banking industry

2020 ◽  
Vol 27 (1) ◽  
pp. 188-201 ◽  
Author(s):  
Alexander Ekow Asmah ◽  
Williams Abayaawien Atuilik ◽  
Dominic Ofori
Keyword(s):  
Banking Industry ◽  
Fraud Triangle ◽  
Study Analysis ◽  
Content Type ◽  
Case Study Analysis ◽  
Financial Pressure ◽  
Antecedents And Consequences ◽  
Triangle Theory ◽  
Set Up

Purpose The purpose of this paper is to investigate the antecedents and consequences of employee fraud, focusing on the banking industry in Ghana. Design/methodology/approach A major bank was selected for the case study analysis. The researchers employed qualitative data analysis for the study. Content analysis of investigation reports and interviews of employees from different functional areas were used as the main data collection tools. Findings This study found that loans contracted by bank employees with huge repayment amounts put financial pressure on them to commit fraud. The study also found that inadequate controls in some areas of the bank can fuel the commission of fraud. In addition, aggrieved employees have highly chances of committing fraud. Huge punitive consequences were noted to exist for the employee who perpetrates the fraud and shareholders are also affected by the fraudulent behaviour of employees. Research limitations/implications Findings shown in the study confirm the hypotheses of the fraud triangle theory on the causes of fraud in spite of its criticisms. The findings are also consistent with extant studies on the antecedents and consequences of fraud. The use of one bank for the case study analysis as well as the three-year analysis period imposes a limitation on the study. Future studies can explore fraud using other different theoretical lenses. Gathering data from more than one bank and for a longer period of analysis may provide more accurate results. Practical implications This study provides some recommendations for fraud prevention in the banking industry in Ghana. The major one is the need for the central bank to collaborate with financial institutions to set up an effective credit worthiness system that will aid the monitoring of activities of the banks. Banks should also ensure that systems of controls are reviewed regularly to identify and deal with fraud. Originality/value This study is original, as it focuses on an industry that is highly susceptible to fraud because of issues of confidentiality with data and with the scanty literature on fraud.

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