Weekly Blog #7 - Identifying and Profiling Fraudsters 2016

Q: Differential Association theory helps to explain why fraud occurs by groups within an organisation. General Strain Theory explains why individuals turn to fraud, bribery and corruption. However, Cressey’s Fraud Triangle addresses both.

Yes, I believe the Fraud Triangle theory addresses both theories as they explain the pressures and rationalisations employees may experience before committing fraud, bribery or corruption (Dorminey, 2010).  However, I think Cressey’s triangle framework itself does not prevent fraud as everyone’s rationalisations are different thus cannot be explained.  Everyone commits fraud for different reasons and circumstances (Stewart, 2006).

In the past, I have been in a job where poor decision making resulted in employees left angry and frustrated.  The company lost lots of money resulting in employees getting a pay cut.  We all felt annoyed and unappreciated.  Applying the fraud triangle theory in my situation, it explains that employees in my position may start to commit fraud, bribery or corruption due to the pressure we may be feeling. Our rationalisation is we work hard and don't deserve a pay cut.  If the opportunity arises, the fraud is committed.

One of the reasons behind why unethical conduct is committed is due to poor management styles and employee treatments (Cezair, 2009).  Therefore my advice to anyone (managers in particular), who come into a new department to take over a long existing manager who created a positive working environment is to look at what they have done well and poorly.  The new manager must ensure the positive working environment continues.  If the new manager has a bad attitude or increases productivity without extra pay it could turn employees against the manager. 

Personal financial pressure and household debt are the two of the biggest reasons people commit fraud – pressures everyone experiences in their life (KPMG, 2013).  To limit their rationalisation, all employees must be respected and treated accordingly, thus setting a positive environment therefore increasing staff morals (KPMG, 2013).

References

Cezair, J. A. (2009). HOW INTERNAL AUDIT CAN BE EFFECTIVE IN COMBATING OCCUPATIONAL FRAUD. Internal Auditing, 24(3), 22-32. Retrieved from http://gateway.library.qut.edu.au/login?url=http://search.proquest.com/docview/214389081?accountid=13380

Dorminey, J. W., Fleming, A. S., Kranacher, M., & Riley, R. A. Jr. (2010). Beyond the fraud triangle. The CPA Journal, 80(7), 17-23,3. Retrieved fromhttp://search.proquest.com/docview/637276283?accountid=13380

KPMG. (2013). A survey of fraud, bribery and corruption in Australia & New Zealand 2012.  Retrieved from: https://www.kpmg.com/AU/en/IssuesAndInsights/ArticlesPublications/Fraud-Survey/Documents/fraud-bribery-corruption-survey-2012v2.pdf

Stewart, J. (2006). White collar crime: Fraud, bribery and corruption - all alive and well? Credit Control, 27(4), 50-60. Retrieved from http://gateway.library.qut.edu.au/login?url=http://search.proquest.com/docview/208172593?accountid=13380

Additional Information:

How people rationalise Fraud:
https://www.youtube.com/watch?v=Tb6QX9Yy1GM

Real-time fraud prevention in a real time world:
https://www.youtube.com/watch?v=sMDg7ld1tZU

Merton's General Strain Theory:
https://www.youtube.com/watch?v=1fsTFx6xZ2M

Differential Association Theory & Social Conflict Theory:

https://www.youtube.com/watch?v=vtD9C1MbIqg