A fraud triangle analysis of the libor fraud
MetadataShow full item record
This study examines the effectiveness of Cressey’s (1953) fraud risks factors adopted by the AICPA and the ACFE in detecting fraud in banks involved in the LIBOR scandal. Cressey (1993) posits that, for fraud to occur, pressure, opportunity and rationalization must be present. In this article, we develop variables which serve as proxies for pressure, opportunity and rationalization and test them using data from S&P Capital relating to the sixteen banks that were involved in the LIBOR scandal with a matched sample of non-fraud banks. We identify one pressure variable (profit margin) and three opportunity variables (percentage of outside directors in the banks, number of board members on the banks’ audit committee and the banks’ involvement in litigation) that are linked to increased incidence of fraud. The variables representing rationalization are not significant in predicting fraud in banks. Auditors are encouraged to employ these variables in analyzing fraud risks in banks.
DescriptionThis is the accepted manuscript version of the article. Permission has been granted by the Journal of Forensic and Investigative Accounting for this version to appear here. The version of record is available at http://web.nacva.com/JFIA/Issues/JFIA-2018-No2-3.pdf.
Showing items related by title, author, creator and subject.
Lokanan, Mark (Journal of Financial Crime, 2019)Purpose The purpose of this paper is to formulate and propose a fraud investigation plan that forensic accountants can use to investigate financial frauds. In particular, the paper sets out the structure and rationale of ...
Lokanan, Mark (European Accounting Review, 2017)The paper maintains that all acts of financial crimes can be explained within a general theory of moral action and analyzed as such. In this regard, the paper presents such a theory – Situational Action Theory (SAT) – and ...
Lokanan, Mark (Advances in Public Interest Accounting, 2019)The London Interbank Offered Rate (LIBOR) is considered to be the most important interest rate in finance upon which trillions in financial contracts are decided. In 2008, it was revealed that the LIBOR traders were rigging ...