Psychological Pathways to Fraud: Understanding and Preventing Fraud in Organizations

In response to calls for more research on how to prevent or detect fraud (ACAP, Final Report of the Advisory Committee on the Auditing Profession, United States Department of the Treasury, Washington, DC, 2008; AICPA, SAS No. 99: Consideration of Fraud in a Financial Statement Audit, New York, NY, 2002; Carcello et al., Working Paper, University of Tennessee, Bentley University and Kennesaw State University, 2008; Wells, Journal of Accountancy, 2004), we develop a framework that identifies three psychological pathways to fraud, supported by multiple theories relating to moral intuition and disengagement, rationalization, and the role played by negative affect. The purpose of developing the framework is twofold: (1) to draw attention to important yet under-researched aspects of ethical decision-making, and (2) to increase our understanding of the psychology of committing fraud. Our framework builds on the existing fraud triangle (PCAOB, Consideration of fraud in a financial statement audit. AU Section 316, , 2005) which is used by auditors to assess fraud risk. The fraud triangle is composed of three factors that, together, predict the likelihood of fraud within an organization: opportunity, incentive/pressure, and attitude/rationalization. We find that, when faced with the opportunity and incentive/pressure, there are three psychological pathways to fraud nestled within attitude/rationalization: (1) lack of awareness, (2) intuition coupled with rationalization, and (3) reasoning. These distinctions are important for fraud prevention because each of these paths is driven by a different psychological mechanism. This framework is useful in a number of ways. First, it identifies certain insidious situational factors in which individuals commit fraud without recognizing it. Second, it extends our knowledge of rationalization by theorizing that individuals use rationalization to avoid or reduce the negative affect that accompanies performing an unethical behavior. Negative affect is important because individuals wish to avoid it. Third, it identifies several other methods fraudsters use to reduce negative affect, each of which could serve as potential “psychological red flags” and helps predict future fraudulent behavior. Finally, our framework can be used as a theoretical foundation to explore several interventions designed to prevent fraud.     

超市里来了“菜市场”

<正>据《北京晚报》6月7日报道,习惯遛早后去早市买菜的市民,现在开始排队到超市买更便宜、新鲜的蔬菜了。目前各超市争相通过向农民直接采购农产品以降低产品价格、保持货品新鲜,不仅同行之间竞争,也与菜市场争客流。     

CEO turnover and shareholder wealth: Evidence from CEO power in Taiwan

This paper investigates the relationship between CEO turnovers and shareholder wealth and/or the volatility of firm performance, and examines whether CEO power matters in this relationship. Successors tend to possess less power than predecessors. The announcement effects of CEO turnovers present higher abnormal returns for turnovers in which predecessors and successors share a similar power level and a lower volatility for turnovers in which successors have less power. Volatility is lower and liquidity is higher when CEO turnovers involve successors with less power.     

Fraud and the African Renaissance

Forensic studies have identified fraud as a major factor that hampers Africa's economic development. This paper first establishes a link between fraud and the ideal of the African Renaissance. It then gives an overview of the extent of fraud in Africa by discussing the findings of a recent forensic survey on fraud in Africa. Against this backdrop it is then argued that what is needed to turn the tide of fraud in Africa is a transvaluation of loyalties to include and cover interests of the modern nation-state rather than just those of the clan, tribe and race. The paper finally calls for African nations to rise up to new challenges in governance by upholding ethical values and by their determination to detect and prevent all forms of fraud as the only viable way towards the realisation of the ideal of an African Renaissance.     

CEO Power,CEO Age and the Policy Instrument Property of State-Owned-Enterprises

In this paper, we examine the relationship between CEO power, CEO age and the efficiency of policy implementation in listed corporations controlled by each province’s State-owned Assets Supervision and Administration Commission (SASAC) in China. We find that CEOs with more power implement policy are more efficiently. We also find that younger powerful CEOs will act more effectively than their older competitors. The reason for the difference is that younger powerful CEOs in state-owned companies are incentivized to implement their policy tasks to gain promotions or political capital. Our results are important to future SOE reform and to understanding the characteristics of SOEs as policy instruments.     

Narcissism and learning from entrepreneurial failure

Failure of a prior business provides an opportunity for an entrepreneur to learn in the subsequent entrepreneurial endeavor, but learning from failure is not guaranteed. Why do some entrepreneurs learn less from failure than others? In this study, we propose that a narcissistic personality can create cognitive and motivational obstacles to learning. We further posit that the inhibiting effect of narcissism will be more salient when the costs of failure, especially social costs, are higher. Our analysis with a survey sample of startups provides the initial empirical evidence about the negative impact of narcissism on learning from entrepreneurial failure. The study adds to research on learning from failure and narcissism in entrepreneurship.     

Fraud and the Politics of Morality

Most large frauds develop only gradually and incidentally. When things fall apart it is politic to call it anything but fraud. The author is a member of the Department of Sociology, University of Liverpool, POB 147, Liverpool L69 3BX.     

The CEO and the external environment

This study confirms other studies and public choice microeconomic theory: CEOs spend more time on issues external to their firms in today's volatile business environment.     

Business Ethics Perspectives: Faculty Plagiarism and Fraud

Faculty plagiarism and fraud are widely documented occurrences but little analysis has been conducted. This article addresses the question of why faculty plagiarism and fraud occurs and suggests approaches on how to develop an environment where faculty misconduct is socially inappropriate. The authors review relevant literature, primarily in business ethics and student cheating, developing action steps that could be applied to higher education. Based upon research in these areas, the authors posit some actions that would be appropriate in higher education and suggest topics for continued study.     

Fraud: who polices Europe?

Fraud in Europe is complex and well organised: it crosses organisational and geographic boundaries. The policing of fraud, on the other hand, is characterised both at national and transnational levels by fragmentation and divided accountability. This paper considers the issues involved in combating fraud in European institutions and spending programmes. It discusses the roles of those bodies with transnational responsibilities such as UCLAF (now OLAF), the European Fraud Prevention Office and the European Court of Auditors. The paper considers the difficulties associated with the Corpus Juris proposals for a single European legal area to facilitate the fight against fraud related to the European Budget. It concludes that the task of policing Europe is hampered not only by the diversity of national political and jurisprudential systems, but also by the weakness and lack of independence of the transnational institutions.     

Online Auction Fraud: Ethical Perspective

Internet fraud is an issue that increasingly concerns regulators, consumers, firms, and business ethics researchers. In this article, we examine one common form of internet fraud, the practice of shill bidding (when a seller in an auction enters a bid on his or her own item). The significant incidence of shill bidding on eBay (in spite of the fact that it is illegal just as it is in live auctions) exemplifies the current ineffectiveness of regulatory means as well as the lack of effective societal mechanisms to prevent online fraud. Further, the proliferation of shill bidding along with other types of internet fraud may have broader implications. If unethical behavior such as shill bidding becomes too widespread on the internet, regulators and other societal forces may deem it necessary to institute controls that will impact the entire online marketplace as well as the future development and regulation of business activities on the internet. Our results indicate that shill bidding is perpetrated on eBay significantly more often than 0.1% rate of fraud estimated by the firm. This suggests that regulators, users, and others stakeholders may become concerned enough to act. The impact of those responses on the internet of the future may affect a broad array of users beyond the unethical sellers on eBay. Alex Nikitkov is an Assistant Professor of Accounting at Brock University in St. Catharines, Ontario, Canada Darlene Bay is an Assistant Professor of Accounting at Brock University in St. Catharines, Ontario, Canada     

高管权力强度、 股权激励与高管显性腐败

文章以2006～2015年我国上市公司高管腐败案件为对象,从高管权力强度视角考察股权激励与高管显性腐败之间的关系,实证结果表明:(1)高管权力越大,其发生权力寻租行为的概率越大,同时代理成本也越高;(2)我国上市公司的股权激励计划,未能有效调节企业高管权力强度与高管显性腐败之间的关系,尤其是国有控股上市公司实施的股权激励计划,反而加大了高管腐败发生概率;(3)货币薪酬越少、 激励有效期越长,发生高管腐败行为概率越高.这些结论对公司决策层完善股权激励计划设计、 优化公司治理、 监督和约束高管权力具有参考意义,也能为证监会、 国资委制定政策提供借鉴.     

试探加入WTO后我国会计的改革问题

随着世界经济一体化进程的加快和中国加入世界贸易组织，无疑将会为我国更广泛、更深入地参与国际分工和国际合作带来新的机遇，使我国企业面临更激烈的国际市场竞争。会计作为经济管理信息系统的一个重要组成部分，必将受到严峻的挑战。     

Corporate Fraud and Managers’ Behavior: Evidence from the Press

Government-sponsored enterprises (GSEs) and quasi-autonomous non-governmental organizations (quangos) comprise a powerful organizational sector that has been criticized for its lack of accountability to governments and their citizens. These organizations are established to serve the public as a whole by targeting the needs of particular groups or fulfilling specific functions. Often they use practices adopted from the business sector, and sometimes they enter the marketplace as profit-making enterprises. In light of the contribution of GSE Fannie Mae to the 2008 world economic crisis, the impact of this sector on effective democratic government bears further examination. In this article, I present a systems model that suggests how researchers might comprehensively assess the accountability of organizations in this sector, here termed the “gray sector,” with respect to their government missions. I focus on four systems dimensions: mission, organizational design, organizational outcomes, and the information feedback process. Organizational design and the nature of the sector population are cited as emerging issues of particular importance.     

会计舞弊行为及对策探析

近年来,会计舞弊行为层出不穷,财务造假方法各不相同,严重干扰了社会经济的健康发展。从会计舞弊的分类及常见手法入手,对会计舞弊行为进行研究,提出了防范会计舞弊的对策。     

CEO经验及个性对企业动态能力的影响分析

在动态能力的理论框架下,不同CEO的经验和个性对企业运用和发展动态能力的影响不同,现探索不同CEO的经验和个性对企业适应环境变化的战略行为会产生哪些影响。实证研究表明,跨国工作经验和专业领域经验的CEO则对企业运用和发展动态能力具有显著的正向影响。具有外向性、开放性和情绪稳定性特征的CEO对企业运用和发展动态能力具有显著的正向影响。另外,CEO的跨国工作经验和专业领域经验对企业适应环境的变革行为具有调节作用。     

CEO风险与董事会展望

Every company lives in a world of risk. Risk management is not a matter of avoiding all risks but rather of choosing the risks to take. Here, you can find out how CEOs and corporate board members should analyse and manage risk.     

Fraud and deception: a response to Gedeon Rossouw

This response addresses the question: how can ethical values play a role in combating fraud? Three points are made. Firstly, ethical values are both self‐ and other‐related. Secondly, changing the prevalence of fraudulent behaviours requires not only a reduction in opportunity for fraud but also a change in mindset of the perpetrators. Thirdly, that change in mindset involves the recognition that there are personal and organizational advantages to be gained by not contributing to or abetting fraudulent behaviour. This latter point is illustrated with reference to the experience of Unilever where sustainable development is seen as contributing to the creation of long‐term shareholder value.     

大型零售连锁业国际化进入模式

进入模式的研究不仅推进了人们对大型零售连锁业国际化进程的理解,更成为分析零售连锁业国际化经营的基础和主要决策环节。本文主要介绍外向型发展的进入模式16种状态,重点分析了独资和合资以及直营和特许组合构成模式,所得结果对于大型零售连锁业外向型发展和跨国经营具有借鉴作用。