Cressey's Fraud Triangle should be of important knowledge within
organisations to help prevent fraud, bribery and corruption. The fraud triangle (below) is a strong explanatory model to help understand why seemingly good people
commit fraud (Mullen, Sinclair, Thomas, 2012). Two other major theories
surrounding fraud occurrence are, differential association theory and general strain
theory. The fraud triangle supports both of these theories as it encompasses
elements that each theory represents.
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| (Van Akkeren, 2016) |
Differential association theory is
related to why fraud occurs by groups within an organisation. The collapse of
Enron is an example of this theory as a group of executives came together to misappropriate
financial statements and even colluded with their auditing firm, Arthur
Andersen to commit financial statement fraud.
In contrast, general strain theory explains
why individuals turn to fraud. The well-known case of Joel Barlow, can be
applied to this theory. Joel Barlow was an individual and defrauded Queensland
Health of millions due to personal strain. The following video is the creator of general strain explaining his theory:
To try and combat fraud,
organisations need to eliminate one element of the triangle; for frauds to
occur, all three elements of Cressey's fraud triangle need to be present (Cressey's Fraud Triangle - Part III: Rationalization, 2011). Fraud, bribery and corruption are
increasing within organisations as there are weak internal controls (giving opportunity
for fraud to be committed), employees feeling unfairly treated (making
rationalization easy) and internal pressures such as layoffs within the firm
(increasing potential financial burden). These three common problems within
organisations are coincidentally the perfect recipe for fraud to occur according
to Cressey’s fraud triangle.
Relevant Links:
Reference List:
Cressey's Fraud Triangle - Part III: Rationalisation. (2011, August 23). [Web log Post]. Retrieved from https://learnaboutfraud.wordpress.com/2011/08/23/cressey%E2%80%99s-fraud-triangle-%E2%80%93-part-iii-rationalization/
Mullen, L. G., Sinclair, D. T., & Thomas, M. L. (2012). Interviewing the fraudsters. The CPA Journal, 82(2), 68. Retrieved from http://search.proquest.com.ezp01.library.qut.edu.au/docview/1010411795?pq-origsite=summon
Van Akkeren, J. (2016). AYB115 Governance, Fraud and Investigation: Week 7 [Lecture Notes]. Retrieved from https://blackboard.qut.edu.au/bbcswebdav/pid-6292866-dt-content-rid-6037497_1/xid-6037497_1
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