Understanding and explaining fraud, bribery and corruption

When fraud is committed by employees in our company, theories and models can help us understand why it occurred. Differential Association theory claims that social behaviour is found in ‘learned attitudes, beliefs or values’ (Donegan and Ganon 2008, 6), explaining that criminal behaviour is learned by others who are engaged in criminal conduct (Salinger 2013). Although I’m not a criminal, I know from experience that it’s human nature to learn behaviour from your peers. In comparison, Strain Theory claims that social problems, including crime, ‘result from the failure of institutions, families and other structures to provide for the functional and affective needs of individuals’, leading to a sense of anomie (Donegan and Ganon 2008, 4). 

Differential Association theory explains why fraud occurs by groups within an organisation, whereas Strain Theory explains why individuals turn to fraud, bribery and corruption. Cressey’s Fraud Triangle is a model that addresses the effect on an individual. It explains that they feel pressure to commit fraud, which is their personal motive, there is an opportunity to commit fraud in the organisation, and the individual rationalises their behaviour (Mackevicius and Giriunas 2013).

(Brumell Group 2015)

I first heard about the Fraud Triangle during my university studies in a subject called Audit and Assurance, where it helped me understand why fraudulent financial reporting and asset misappropriation were committed by employees and management. It can also be used to explain an increase in this behaviour here at the bank of Australia. We can try and reduce this my recognising employee’s pressures such as financial distress, limiting opportunities to commit fraud (Coenen 2016), and building an ethical culture where fraud is less likely to be rationalised.

(Procurement Academy 2014)

References
Brumell Group. 2015. “The Fraud Triangle Theory.” Image. Accessed May 22, 2016. http://brumellgroup.com/news/the-fraud-triangle-theory/.

Coenen, Tracy. “The Fraud Triangle and What You Can Do About It.” Accessed May 12, 2016. https://www.allbusiness.com/the-fraud-triangle-and-what-you-can-do-about-it-4968017-1.html.

Donegan, James and Michele Ganon. 2008. “Strain, Differential Association and Coercion: Insights from the Criminology Literature on Causes of Accountant’s Misconduct.” Accounting and the Public Interest 8: 1-20. Accessed May 9, 2016. http://search.proquest.com.ezp01.library.qut.edu.au/docview/235004989?pq-origsite=summon.

Mackevicius, Jonas and Lukas Giriunas. 2013. “Transformational Research of the Fraud Triangle.” Ekonomika 92(4): 150-163. Accessed May 9, 2016. http://search.proquest.com.ezp01.library.qut.edu.au/docview/1492268000?pq-origsite=summon.

Procurement Academy. 2014. “Fraud Prevention – Cressey’s Triangle.” YouTube video, posted November 24. Accessed May 22, 2016. https://www.youtube.com/watch?v=IK_2oMODNXk.

Salinger, Lawrence. 2013. “Differential Association Theory.” In Encyclopedia of White-Collar and Corporate Crime. Accessed May 9, 2016. http://dx.doi.org.ezp01.library.qut.edu.au/10.4135/9781452276175.n135.