FRAUD THEORY
1.
Fraud Triangle by
Cressey (1953)
a. Pressure
is a reason why someone do a fraud, usually causing by the problem of
financial, medical bills, expensive tastes, addiction problems, etc.Often this
need/promblem is non-discloseable in the eyes of fraudster. That is, the person
believes, for whatever reason, that their problem must be solved in secret.
b. Opportunity
is a chance that allows fraud can occur, usually causing by weak internal
control of a company, poor management oversight, and through abuse the power.
c. Rationalization
is a situation where the offender develop the justify their fraud action.
2.
Fraud Scale
The
fraud scale helps determine the likelihood of fraud by rating each of the three
elements of fraud on a scale of low to high. When situational pressures and
opportunity are high and personal integrity is low, then the fraud is much more
likely to occur that when integrity is high and opportunity and pressures is
low.
a. Situational pressures
·
Immediate
problems with environment
·
Usually debts/losses
b. Perceived opportunities
·
Poor controls
c. Personal integrity
·
Individual code
of behavior
3.
The Fraud Diamond
The
fraud diamond was introduced by David T. Wolfe and Dana R Hermanson in
2004. This theory adding one element,
that is capability. Capability is individual character to plays the fraud with
several factors:
a. Position
and authority in the organization
b. High
level understanding of system
c. Egoistic
nature
d. Persuasive
and deceptive nature
e. Resillence
to stress
4.
M.I.C.E Theory (Money,
Ideology, Coercion, Ego)
Introduced
by Professor Jason Thomas of West Virginia University (2010). The M.I.C.E
represent four main motivating factors of fraud. The concept claims
that financial gain does not explain the motivation for all fraudsters.
a. Money as a
motivating factor would include all real
or perceived financial pressures.
b. Ideology,
the perpetrator often believes that his or her actions benefit the greater
good, or that following a particular
rule is against his or her beliefs.
c. Coercion is when someone is pressured into committing a crime that they do not want to
commit.
d. Ego is
closely related to the concept of financial
pressure and involves the feeling of entitlement or pride.
5. GONE Theory
(Greeds, Opportunities, Need, and Exposure)
Greeds dan Need relates to the fraudster indicidual. Opportunities
dan Exposure relates to the
victims of fraudster. The fraudster is individu or a group from internal
organization or externally that aggrieving the victim. The victim is an
organization, instance or public who aggrieved.
6.
Pentagon Fraud Theory (Crowe’s
fraud pentagon theory)
Introduced
by Crowe Howarth in 2011. Pentagon fraud theory is an expansion of triangle
fraud theory. In this theory, Crowe adding 2 fraud elements, that are:
a.
Competence, is a capability of employee to ignore
internal control, develop concealment strategy and control the social
situaituon for self-interest.
b.
Arrogance is superiority character on someone rights
and feels that internal control or organization policy is not valid for them.
References
·
The psychology of fraud
journal by Dr. John Nugent, LLM, CPA, CFE, CISM, FCPA
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