Organisational fraud: a discussion on the theoretical perspectives and dimensions
| Pages | 283-293 |
| DOI | https://doi.org/10.1108/JFC-04-2019-0040 |
| Date | 17 January 2020 |
| Published date | 17 January 2020 |
| Author | Afzal Izzaz Zahari,Jamaliah Said,Roshayani Arshad |
| Subject Matter | Financial risk/company failure,Financial crime |
Organisational fraud: a discussion
on the theoretical perspectives
and dimensions
Afzal Izzaz Zahari,Jamaliah Said and Roshayani Arshad
Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Malaysia
Abstract
Purpose –The purpose of thispaper discusses literature on organisationalfraud in terms of organisational
behaviours that lead to fraudulent actions. The discussion includes organisational perspectives and
weaknesses that can be obtained from the organisation fraud dimensions of leadership structure, control
system and organisationalculture.
Design/methodology/approach –The paper explorestheoretical explanations in terms of the causality
of organisational fraud by comparing its different levels. The core organisational fraud triangle (Free,
Macintosh and Stein, 2007) approach was initially conceptualised on different factors that caused
organisationallevels of fraud.
Findings –Different factors,such as the collusion and normalisation of fraud, enabled organisationallevels
of fraud.
Originality/value –The paper presentsan extension of the original framework.
Keywords Culture, Control, Leadership, Fraud
Paper type Conceptual paper
Introduction
International entities such as the Association of Certified Public Accountants (AICPA),
Certified Institute of Management Accountants (CIMA) and International Organisation of
Supreme Audit Institutions (INTOSAI) have all acknowledged the risks of fraud in
organisations. Fraud is the presentation with the intent of deceiving others (AICPA, 2006),
including activities such as theft and corruption (CIMA, 2008), and an unlawful intention
between two parties with the intent of deceivingone party (INTOSAI, 2016). Losses reported
from corruption, theft, embezzlement, asset misappropriation, money laundering and
corruption (ACFE, 2016b) can be classified into economic, financial and reputation losses.
Occupational fraud has caused losses of up to $6.3bn, with 2,410 cases reported by the
ACFE in 2016. Enron is an example of organisational levels of fraud, the Chief Executive
Officer (CEO) Jeffrey Skillingand founder Kenneth Lay had hidden the company losses from
their investors (Free and Macintosh, 2006). The company’s auditor Arthur Anderson was
guilty of illegally destroyingdocuments relevant to the fraud investigation, whichled to the
dissolution of one of the biggest audit firms in history (Dugan, 2002;Edelman and
Nicholson, 2011).
The highest number of fraud cases occurs through misappropriation of assets (ACFE,
2016a). Misappropriation of asset happens when individuals trusted as caretakers of an
organisation’s assets decide to syphon assets for their personal use or for other purposes
without benefiting the organisation where they are employed. This example of fraud can
occur in any organisation. Fraud can transpire in dubious financial reporting and journal
entries, as well as the override of controls by management for their own benefits. The
Organisational
fraud
283
Journalof Financial Crime
Vol.27 No. 1, 2020
pp. 283-293
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-04-2019-0040
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