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Fraud and Risk Management

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Fraud and Risk Management

 

 

Fraud triangle is a useful instrument employed by auditors and other anti-fraud professionals to combat fraud. It has its origin in Cressey’s book, Other People’s Money: A Study in the Social Psychology of Embezzlement. The fraud triangle consists of three elements: pressure (usually financial one), opportunity (a lack of control body) and rationalization (a mind-set that the fraud will resolve an immediate problem or need). There is a high fraud risk when all the three elements are presented and a medium risk for a fraud to be committed when two of them are presented.

 

The fraud triangle has been extended to a “fraud diamond” in recent years by adding the “human element” in the fraud risk assessment process – values and personal integrity. So, is there a “type” among the employees who have committed fraud? According to the psychologists – yes. Some personality traits (the so-called Dark Triad) are more often related to the counterproductive behavior at work than others.

 

DARK FOUR is based on Dark Triad but adds a fourth component to the model. It evaluates the risk of counterproductive behavior at work measuring four personality traits: manipulativeness, narcissism, impulsiveness and greed.

 

Try it!    

 

Resources:

  1. ACFE. (2011). Fraud examiners manual. Association of Certified Fraud Examiners, Austin, TX.
  2. Lokanan, M. E. (2015). Challenges to the fraud triangle: Questions on its usefulness. Accounting Forum, 39 (3), 201-224. doi: http://dx.doi.org/10.1016/j.accfor.2015.05.002
  3. Padgett, S. (2014). Profiling the fraudster: removing the mask to prevent and detect fraud.