Understanding the Behavioural Theory of Fraud: The Accountants’ Perception of the Fraud Triangle

Abstract

Fraud has become one of the greatest threats to the world economy. It is a global problem, not only in terms of its impact on our major corporations and key financial institutions, but also its effect on smaller companies and ultimately the wider public who indirectly pay for the losses through increased costs of goods and services. Many organisations fail to recognise that fraud can prove to be even more catastrophic than other forms of critical incidents such as terrorist attack, fire or flood. Events of that nature may cause serious disruption to the business but rarely are they insurmountable. However, a significant fraud against a company not only undermines financial stability, it can ultimately result in such damage to the reputation and loss of investor's confidence that it proves irreparable. It is often to these reasons that company directors' write-off losses to fraud under the general heading of Bad Debt rather than admit that there has been a failure to implement proper safeguards or managerial negligence In applying appropriate levels of oversight to routine business processes where company cash and assets are at risk.

Keywords: Behavioural Theory, Fraud Theory, Fraud Triangle