![Sample our Economics, Finance,Business & Industry journals, sign in here to start your access, latest two full volumes FREE to you for 14 days]({"type":"image" , "src" : "/sda/5931/TOC-Subject-Sample-2021-Economics-Finance-Business-Industry.jpg"})
Abstract
We suggest that when using the fraud triangle, academics and professionals should take account of the insights gleaned from our study, in which Switzerland and Austria's “elite” white-collar offenders with high professional standing and respectability were interviewed. Our perpetrators consider that only opportunity is a universal precondition of acts defined by others as fraud, though perceived pressure is salient to most frauds. By contrast, financial incentives are not required to be motivational elements. The frequently cited “rationalisation” is too simplistic: rather, a fraud-inhibiting inner voice before the crime and a guilty conscience after it were present among those interviewed.
Abbreviations:
- ACFE
- Association of Certified Fraud Examiners
- AICPA
- American Institute of Certified Public Accountants
- AS
- Auditing Standard
- CEOs
- Chief Executive Officers
- EASA
- European Academic Software Award
- FT
- Fraud Triangle
- IDW
- Institut Der Wirtschaftspruefer (Institute of Public Auditors in Germany)
- IFAC
- International Federation of Accountants
- ISA
- International Standard on Auditing
- M.I.C.E.
- Money Ideology Coercion Ego
- PCAOB
- Public Company Accounting Oversight Board
- PS
- Pruefungsstandard (Auditing Standard)
- SAS
- Statement on Auditing Standards
- WCC
- white-collar criminal
Notes
1 The fraud risk factors’ relevance is acknowledged by American standards, [see Auditing Standard (AS) No. 5 (PCAOB, 2007) or Statement on Auditing Standards (SAS) 82 (AICPA, 1997)] as well as by other international auditing standards [Pruefungsstandard (PS) 210 (IDW, 2006), International Standard on Auditing (ISA) 240 or ISA 250 (IFAC, 2013)]. The Statement on Auditing Standards, SAS 99 (AICPA, 2002), “categorises these factors according to the fraud triangle” (Wilks & Zimbelman, 2004, p. 723; Donegan & Ganon, Citation2008; Norman et al., Citation2010). Most recently, the AICPA redrafted SAS, “Consideration of Fraud in a Financial Statement Audit” (Dorminey et al., 2012) to enhance the clarity of drafting conventions and to converge with ISAs (effective for audits of financial statements for periods ending on or after December 15, 2012). According to the AICPA, the clarified SAS does not change or expand SAS 99 in any significant respect (AICPA, 2012).
2 Like situational crime prevention generally, it takes for granted the legal framework, which itself is the creation of a political process affected by campaign financing and lobbying: a particularly important issue when we consider crimes that affect the interests of capitalist firms, though intra-capitalist conflicts should not be ignored in making sense of the criminalisation process.
3 The principal exception to this is the hotly disputed allegations about what Swiss banks did with “Nazi gold” taken from the Jews (Bower, 1997). This is not to contest that part of the historic popularity of Switzerland, and to a lesser extent Austria, as a haven for international funds was also its banking secrecy provisions, which later was transmuted in public discourse to ‘customer confidentiality’.
4 Wolfe and Hermanson (2004) categorise capability into (a) position/function, (b) brains, (c) confidence/ego, (d) coercion skills, (e) effective lying and (f) immunity to stress.
5 The term “Fraud Triangle” does not exist in Cressey's original writings.
6 They do not show how it is possible to scale or calculate these three elements. For instance, someone asserts: opportunity = “3”, motivation = “5” and rationalisation = “2”; total = “3 + 5 + 2 = 10.” But it is quite obscure how we can standardise the basis for these ratings and make them therefore evidence based.
7 For instance, someone asserts: opportunity = “3”, motivation = “5” and rationalisation = “0”; total = “3 × 5 × 0 = 0″; hence, in absence of one element “zero fraud” is implied.
8 In our view, the impact of this sort of compensation system on the risks respectively of crimes against the organisation and of crimes on behalf of its formal goals need to be analysed separately. Though in the light of recent huge fines against financial institutions in many countries, the latter may receive a higher control priority than in the past.
9 A sociobiologist might argue that such blame and harm mitigation would also reduce the risk of formal action, and therefore is more than psychologically functional.
10 Some data were repeated during the last couple of interviews without additional information. Due to this circumstance, in our view, 13 interviews are enough to make some conceptual points. One interview was not analysed because of the low information content compared to other tape recordings.
11 The applied interviews are semi-structured, problem-centred and open-ended (Witzel, 2000).
12 A stringent obligation to observe confidentiality, as well as the empirical problem of drawing conclusions make us careful to avoid more background information about the interviewees.
13 In our article, the high profile has no bearing on the offenders’ personality profile.
14 In the majority of our examined cases, an accurate separation of occupational from corporate crime is not possible. Generally, the majority of the interviewees offended simultaneously both for themselves and for the organisation. Those cases where our convicted persons are still (or again) holding their position in the victimised organisation may be explained by two facts: First, some frauds are not only committed ‘for themselves’ but also ‘for the company’. Second, a senior position in a company is sometimes difficult to replace immediately and the person was considered to be still valuable overall.
15 Swiss and Austrian courts as well as law firms selected the offenders according to the kind of fraudulent behaviour and to the damage quantified in Swiss Francs or Euro as high as possible. A stringent obligation to observe confidentiality, as well as the empirical problem of drawing conclusions make us careful to avoid an average or median figure of the damage caused. Moreover, losses to victims may not correspond to profit to offenders, and may be difficult to calculate accurately (Levi & Burrows, 2008).
16 The applied method, devised by Professor Zelger, was developed for scientific purposes. GABEK®/WinRelan® was selected as one of the finalists of the European Academic Software Awards (EASA) and still is used at several major universities, e.g. Stanford University. Albeit other programs may used more widely, the software choice depended on our purpose and target of the content analysis: achieving a better understanding in terms of cause–effect relationship of the transcribed interviews. In total, 425 content-relevant terms and 10.505 connections between them were identified and coded.
17 Cressey describes this innocent kind of fraudster as “independent businessmen” (Cressey, 1953, p. 102).
18 Levi categorises long-firm (bankruptcy) fraud thus: “running one or more businesses with the initial or subsequent aim of defrauding creditors” (2008, p. xvii), and other fraud into a threefold typology: “(1) pre-planned frauds, in which the business scheme is set up from the start as a way of defrauding victims […] (2) intermediate frauds, in which people started out obeying the law but consciously turned to fraud later and (3) slippery-slope frauds, often in the context of trying […] to rescue an essentially insolvent business or set of businesses” (2008, p. xix).
19 The literature distinguishes between two forms of trust violators: “accidental fraudster” and “predator”. The former, a law-abiding person, is often characterised as the typical white-collar criminal. The latter, an individual who might have begun as an “accidental fraudster” turn into a “predator” and, hence, is better organised, has more complex concealment schemes, and is better prepared to handle monitoring, control systems and auditors than the typical fraudster. A “predator” only needs opportunity to commit a financial crime (Dorminey et al., Citation2012; Rezaee & Riley, Citation2010).
20 Nieuwenboer and Kaptein (2008) focus on the spiralling nature of white-collar crime. From a theoretical perspective but without any empirical studies they address the spread and growth of corruption in companies and, drawing on social identity theory, identify three organisational spirals: The spiral of divergent norms, of pressure, and of opportunity.
21 Banking scandals since the financial crisis of 2007–present have illustrated the importance of individual as well as general corporate culture as enablers of white-collar crimes, though it remains to be seen whether those currently not identified as “cultural problems” will turn out to have behaved significantly differently. Accounting for inter-capitalist differences is inhibited by their lack of transparency.