Fraud: The root causes

Abstract

In the popular imagination, management fraud and corruption seems to have spread almost everywhere; yet the facts show that mercantile fraud has been a perpetual scourge in many societies. It is nevertheless instructive to analyse the causes of fraud as a basis for appropriate risk management. These include economic recession, employee disaffection, indifference to internal control, a possible erosion of ethics, inability of obsolete systems to accommodate new transaction types and volumes, and often a time lag while organizational rules catch up with new ways of committing offences. Initial failure to detect fraud also tends to be likely to have been aggravated by failure to apply audit scepticism. Fraud and corruption are likely to gain even greater attention in the near future, as existing functions of public service are ‘outsourced’.