Challenges to the fraud triangle: Questions on its usefulness

Abstract

Fraud is increasing with frequency and severity. In this paper, I explore the assertion of the fraud triangle as a useful practitioner framework employed to combat fraud. This paper is anchored through Fairclough's critical discourse theory, and is supported with evidence from three accounting fraud cases. The findings indicate that the Association of Certified Fraud Examiner's (ACFE) perpetuates a discourse that presents a restricted version of fraud. Fraud is a multifaceted phenomenon, whose contextual factors may not fit into a particular framework. Consequently, the fraud triangle should not be seen as a sufficiently reliable model for antifraud professionals.

Keywords:

• Fraud triangle
• Fraud
• Critical discourse analysis
• Structure

Acknowledgement

I would like to thank Glen Lehman (Editor-in-Chief) for facilitating the review process and the two anonymous reviewers whose valuable and insightful comments help improved the manuscript.

Notes

2 “Corporate accounting fraud”, “corporate fraud”, and “fraud” will be used interchangeably throughout the paper. Given the nature of the paper, it was not necessary to disentangle the terms since all of three were central components of the research methodology undertaken (also see Lynch et al., 2004, p. 397).

3 I would like to acknowledge one of the anonymous reviewers for this point.

4 The Canadian government's sponsorship scandal (1994–2003) was a national unification scheme that saw approximately $50 million diverted into the bank accounts of political parties, programme administrators, and their families, friends and business colleagues (see Neu et al., 2013b, p. 505).

5 The concentration is more profound with respect to the segregation of duties, which has garnered close scrutiny since the enactment of the Sarbanes-Oxley Act section 404 requirements (Dorminey et al., 2010, p. 19).

6 Another example of collusive behaviour is the Freddie Mac (2003) fraud case. The main players in the Freddie Mac scandal were the President, CFO, and Sr. VPs. An SEC investigation found that they collaborated to fraudulently mis-state earnings (mostly underreported) over a four-year period in order to smooth volatility in earnings and meet Wall Street targets (SEC v. Federal Home Loan Mortgage Corporation, 2007).