Accounting & finance

Top 16 Fraud Models

Intro

We have 16 fraud model that can be useful for your research work

1. Fraud Triangle.

Cressey (1950) came up with three fraud risk factors as pressure, opportunity and rationalisation.

2. Fraud Scale (I)

Albrecht, Howe and Romney (1984) developed a “fraud scale” relying on two components of the fraud triangle, pressure and opportunity, but replacing rationalisation with personal integrity (Free, 2015).

Sources: Vassiljev & Alver (2016); Tsomokos (2017); Puspasari (2016);

3. Fraud Cube

Doost (1990) Underlying this concept is the ideology that there are three dimensions encompassing computer crime ‒ relationship, expertise and motivation” (Tran, 1992)

4. Fraud Diamond

Wolfe and Hermanson (2004) added capability to pressure, opportunity and rationalisation by Cressy (1950). Based on the fraud diamond theory, the person also must have the capability to recognize the open doorway as an opportunity and to take advantage of it (Ruankaew, 2016).

5. Fishbein and Ajzen's Theory of Planned Behaviour (TPB)

Carpenter and Reimers (2005) gave four dimensions of the TPB as: attitude (toward fraud), subjective norms, perceived behavioural control and moral obligation. The TPB is not a fraud model as such; however, its purpose is to explain any planned, or intentioned, action. Since fraudulent acts are essentially planned behaviours contingent upon the will of the actor, the TPB framework is relevant in financial fraud research (Raval, 2016).

6. Fraud Square (I)

Bressler and Bressler (2007) stated four elements of the fraud square proposed: incentive, opportunity, capability, and realization (Mackevicius & Giriunas, 2013).

7. ABCs of White Collar Crime

Ramamoorti (2008) by ABC: A ‒ the Bad Apple: individual personality characteristics of those that commit fraud; B ‒ the Bad Bushel: group dynamics of collusive behaviour; C ‒ the Bad Crop: the larger cultural/societal factors that enhance or permit fraud.

8. Fraud Pentagon (I)

Marks (2009). Fraud pentagon consists of five elements: pressure, opportunity, rationalization, competence, and arrogance, where “competence expands on Cressey’s element of opportunity to include an individual’s ability to override internal controls and social controls to his or her advantage. Arrogance or lack of conscience is an attitude of superiority and entitlement or greed on the part of a person who believes that corporate policies and procedures simply do not personally apply” (Marks, 2009).

9. Fraud Square (II)

Cieslewicz (2010). The notion of societal influences added to the fraud triangle (Free, 2015).

10. Fraud Pentagon (II)

Goldman (2010). Goldman adds the dimensions of personal greed and employee disenfranchisement (Free, 2015).

11. Triangle of Fraud Action

Dorminey, Fleming, Kranacher and Riley (2012). While the Fraud Triangle identifies the conditions under which fraud may occur, the Triangle of Fraud Action describes the actions an individual must perform to perpetrate the fraud. The three components of the Triangle of Fraud Action are the act, concealment, and conversion. “The act represents the execution and methodology of the fraud, such as embezzlement, check kiting, or material fraudulent financial reporting. Concealment represents hiding the fraud act; examples of concealment include creating false journal entries, falsifying bank reconciliations, or destroying files. Conversion is the process of turning the ill-gotten gains into something usable by the perpetrator in a way that appears to be legitimate; examples include laundered money, cars, or homes. (Dorminey et al., 2012).

12. M-I-C-E

Dorminey, Fleming, Kranacher and Riley (2012). M means ‘money’, ‘I’ – ‘ideology’, ‘C’ – ‘coercion’ and ‘E’ means ‘ego’ or ‘entitlement’. MI-C-E modifies the pressure side of the Fraud Triangle, as it provides an expanded set of motivations beyond a non-shareable financial pressure (Dorminey et al., 2012).

13. Fraud Scales (II)

Mackevicius and Giriunas (2013) listed the elements of the fraud scales are the following: motives, conditions, capabilities and fulfilment. The first element of the fraud scales is the motive. It determines whether an employee tends to behave unfairly and why. The second element of the fraud scales is the study of the conditions that increase their risk. The third element is the possibilities, which are treated as an option granted to an employee who is hoping to commit a fraud. The fourth element is realization, which is seen as a means by which employees justify unfair behaviour” (Mackevicius and Giriunas, 2013, p. 159-160).

14. The Auditor’s Model with Respect to Fraud

Mackevicius and Giriunas (2013) listed the elements of the fraud scales are the following: motives, conditions, capabilities and fulfilment. The first element of the fraud scales is the motive. It determines whether an employee tends to behave unfairly and why. The second element of the fraud scales is the study of the conditions that increase their risk. The third element is the possibilities, which are treated as an option granted to an employee who is hoping to commit a fraud. The fourth element is realization, which is seen as a means by which employees justify unfair behaviour” (Mackevicius and Giriunas, 2013, p. 159-160).

15. Symbiosis of Fraud Triangle and Crime Triangle

Mailley (2015). The Crime Triangle is introduced as a complement to the universally accepted Fraud Triangle. The Crime Triangle’s macro view of a fraud event expands the Fraud Triangle’s perpetrator centric (micro) focus to provide a comprehensive perspective of a fraud event (Mailley, 2015).

16. A Disposition‐based Fraud Model

Raval (2016) stated that a complete model of human behaviour should include the two interacting elements: organism (agent) and environment (context)…  This model frames financial fraud as an act of indulgence: People commit fraud by indulging in a moral temptation, leading to an intentional act… Thus, the Disposition-based Fraud Model is essentially an interaction between (a) circumstances represented by stimuli that make up the moral temptation on hand, and (b) the actor’s character (disposition)” (Raval, 2016, p. 4)

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