Informing the fraud triangle: Insights from differential association theory
The fraud triangle (FT) has been criticized by scholars and practitioners for not being thorough enough to include every occurrence of fraud. However, not every case of fraud can follow the FT and the problem might have been one of interpretation. The purpose of this paper is to lend support to the fraud triangle (FT) by expanding on the understanding of differential association theory (DAT). Sutherland’s work on DAT is a major source to inform our understanding of the FT. The return to his work is intended as a clarification of what Sutherland actually says with respect to the FT and a critical assessment of how far his work can be regarded as being authoritative. To accomplish this task, the paper provides anecdotal evidence from three high-profile accounting fraud cases – Livent, WorldCom, and Enron. The findings reveal that the concepts and propositions of DAT do have the potential to expand our understanding of the FT concepts. DAT seeks to explain the content and process of corporate accounting fraud via sub-culture and specific techniques in which criminal behaviour is learned. Practically, the paper contributes to a wider body of literature that expounds on the value to further develop fraud theories to inform fraud detection and prevention.
DescriptionThe definitive version of record will be available at http://jtar.org/id4.html.
Showing items related by title, author, creator and subject.
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 (Journal of Accounting and Auditing: Research & Practice, 2018)In the spring of 1997, the Supreme Court of Canada (“Court”) rendered a decision in Hercules Managements Ltd. v. Ernst & Young  (“Hercules”) that left shareholders out in the cold. Ever since the verdict in Hercules ...
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 ...