Psychological factors: self- and circumstances-caused fraud triggers
| Pages | 228-243 |
| Published date | 28 August 2020 |
| Date | 28 August 2020 |
| DOI | https://doi.org/10.1108/JFC-05-2020-0086 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial crime |
| Author | Dian Anita Nuswantara,Ach Maulidi |
Psychologicalfactors:self-and
circumstances-caused fraud triggers
Dian Anita Nuswantara
Department of Accounting, Universitas Negeri Surabaya,
Surabaya, Indonesia, and
Ach Maulidi
Business School, University of Edinburgh, Edinburgh, UK and
Department of Accounting, BINUS Graduate Program,
Bina Nusantara University, Jakarta, Indonesia
Abstract
Purpose –This paper aims to provide new understanding of fraudulent behaviour by offering different
theoreticaldiscussion on the fraud causation.
Design/methodology/approach –The authors interviewed15 executive managers in one of Indonesia
local governments,by using semi-structured questions.
Findings –The authors explored the dynamics of both self- and other-directed factors in the spread of
fraudulent behaviours, by focusingon the public-sector fraud landscape in local government. As a basis of
analysis, the authors applied thetheory of planned behaviours. In this study, “a concept of fraud triangle”
substantially provides little helpin elucidating the causation of fraudulentbehaviours in local government.
The theoreticaland managerial implications are discussed.
Originality/value –This study offers new direction on broadening and deepening fraud literature and
theoriesabout the root causes of fraudulent behaviours.
Keywords Theory of planned behaviour, Fraud, Psychology,
Self and other-directed fraud factors
Paper type Research paper
Introduction
Fraud is a unique crime (Anand et al., 2015). Many organisations both private and public
sectors are struggling to deal with it.Importantly, fraud by collusion of two or more people,
according to the latest study of Association of Certified Fraud Examiners (ACFE), is the
most difficult crime to be detected and results in high financial loss for organisation [1].
Surprisingly, this kind of fraud remains “clouded and shallow”, and it cannot be solved by
the preventive framework which is focused on the solo psychology of fraud perpetrators
(Free and Murphy, 2015).
In analysing the most common reason why employees committed fraud, some people argue
that social structures in organisation can give unique cues. For example, within corrupt
organisation hierarchical relationships or some kinds of organisational networks, as Lambsdorff
(2002) said, contribute to the fundamental causes of a fraud problem. Lambsdorff (2002) explains
(political) connections is potential to be important factor in spreading information about
opportunistic circumstances. Similarly, Zuber (2015) argues that a social network of fraud
perpetrators is highly likely to contribute to unethical behaviour across organisations.
Under such conditions, Lambsdorff(2002) concludes it is often to see more opportunistic
behaviours occurring in the function of the board levelsrather than the management levels.
JFC
28,1
228
Journalof Financial Crime
Vol.28 No. 1, 2021
pp. 228-243
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-05-2020-0086
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
This statement was also supported by qualitative research (Brown and Mitchell, 2010),
showing that corporate leaders commonly maintain the existing close relationships,
particularly if such relationships give more profitable solutions than other alternatives.
Occasionally, it occurs if thoseleaders lose productivity. A secret agreement between two or
more related people for a deceitful or fraudulent purpose cannot be separated in such
contexts (Brown and Mitchell,2010). This illustrates that the enduring of cooperation among
fraudsters implicitly representsa necessary and enough circumstance for committing fraud.
It is always possiblefor potential fraudster to consider much more the relatednessmatters at
the beginning before the commission of fraud, especially when they have enough power to
manage the organisation they are entrusted with. It has been empirically suggested by
Maulidi (2020), that reciprocity between two or more people cannot be overlooked. This is
because changes on individual’s intention cannot be denied, especially in unethical
behaviour in the name of the organisation. He also adds that, this kind of process can be
successful throughthe frequent interactions among management levels.
There are some studies that have explored the individualised and structural aspects; how
those aspects influence people to commit fraud (Suh et al.,2018;Lokanan, 2018;Belle and
Cantarelli, 2017;Schuchter and Levi, 2015;Soltani, 2014;Morales et al.,2014). Those studies are
good in explaining the commission of fraud which is initiated by a single perpetrator. We see,
those studies do not examine the routines of interaction s between micro- and social psychological
factors within and outside organisation. Some scholars note that we need a theoretical stance on
why (honest) people engage in the circles of fraudulent behaviours, by looking at the interplay
between micro- and macro- factors (Akkeren and Buckby, 2017;Anand et al.,2015). In this state
of affairs, Wikström (2010, p. 217) also accentuates, “in the analysis of crime causation [...]macro
(structural and systemic) factors are best analysed as causes of the causes, while micro factors are
best analysed as causes”. This implies, the origin view of the root causes of fraudulent behaviours
is not separable from social psychologies where the harmful acts occur. This is because factors
attributed to individual and social psychologies have interconnected influences; they are not
standing alone. Based on this reasoning, the current study is planned to answer these theoretica l
voids. In our knowledge, it will be one step forward towards establishing a stronger
interdisciplinary dialogue, to explain the effects of macro interactional levels on individual’s
behaviour and intention to defraud.
This study theoreticallyoffers a different perspective, with a little bit takinginto account
the existing fraud models. It is not to say the existing fraud models(Carpenter and Reimers,
2005;Cohen et al., 2010) is wrong or inappropriate but they are mainly focused on
individuals who are perpetratingfraud by him or herself. The core theoretical model of this
study is theory of planned behaviours (TPB) because it is the most relevant model for
predicting individual behaviour and intention to perform a certain activity (Ajzen, 1991;
Armitage and Conner, 2001). It is thencross-examined and coalesced with the existing fraud
studies to produce new conceptualfraud understanding. In doing so, this study contribute to
the specification of how self-caused and circumstances-caused triggers are interacting in
individuals’decision-makingwith respect to the illicit goal attainment and the maintenance
of commitment to suchgoal achievements.
Literature review
Fraud triangle
The fraud triangle is a fundamental and controversial framework for explaining the root
cause of fraudulent behaviour.It is developed by Cressey (1953, p. 75), a criminologist whose
research focused on embezzlement cases, by performing a series of interviews with several
offenders who perpetrate financial embezzlements. He acknowledges that someone who
Fraud triggers
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