Doug Boyle (DBA Graduate) , Todd DeZoort (Committee Member) , and Dana R. Hermanson (Committee Chair)
The Effect of Alternative Fraud Model Use on Auditors’ Fraud Risk Judgments The Journal of Accounting and Public Policy (Forthcoming)
Fraud continues to be a major problem for society. Thus, an important question to examine is, “Why do some people commit fraud?” For many years, the focus has been on the “fraud triangle’s” three ingredients of pressure/incentive, opportunity, and rationalization/attitude (Cressey, 1973). More recently, another fraud model has been proposed, the “fraud diamond,” which adds a fourth side to the triangle, capability – the personal traits needed to commit fraud, such as intelligence, ego, and immunity to stress (Wolfe and Hermanson, 2004). To begin to understand the effects of using different fraud models, this study examines how auditors assess fraud risk when using a practice aid based on the fraud triangle versus the fraud diamond. Based on an experiment with 89 auditors as participants, we find that auditors using the fraud diamond assess fraud risk as higher than those using the fraud triangle, suggesting that the type of fraud model affects auditors’ judgments. We also find evidence of a new fraud triangle emerging from the results, where the ingredients of fraud are pressure/incentive, opportunity, and “personal characteristics” (which include rationalization/attitude and capability). We encourage additional focus on the drivers of fraud, as well as additional research on the effects of using different fraud models in organizations.
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