The Role of Ethical Climate in Fraud

43 Pages Posted: 18 Jan 2012

See all articles by Pamela R. Murphy

Pamela R. Murphy

Queen's University - Smith School of Business; Queen's University

Clinton Free

UNSW Australia Business School, School of Accounting

Carmel Branston

Queen's University

Date Written: January 11, 2012

Abstract

We examine the role of the ethical climate within an organization when fraud is present, arguing that it is an important yet often overlooked element to consider for fraud prevention and detection. We develop a survey using previously validated measures of ethical climate and new measures capturing motives, attitudes and rationalizations for fraud. Our survey is administered to three groups: 1) individuals who witnessed fraud, 2) individuals who investigated fraud, and 3) prisoners who are incarcerated for committing fraud within an organization. We find that ethical climate plays a significant role when fraud is present within an organization, and it is correlated with specific motives and rationalizations for fraud. The results suggest that ethical climate should be explicitly considered for fraud prevention and detection.

Keywords: ethical climate, fraud, fraud triangle, organizational culture

JEL Classification: M49

Suggested Citation

Murphy, Pamela R. and Free, Clinton Wallace and Branston, Carmel, The Role of Ethical Climate in Fraud (January 11, 2012). CAAA Annual Conference 2012. Available at SSRN: https://ssrn.com/abstract=1986989 or http://dx.doi.org/10.2139/ssrn.1986989

Pamela R. Murphy (Contact Author)

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Queen's University ( email )

Kingston, Ontario K7L 3N6
Canada
6135333260 (Phone)

Clinton Wallace Free

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

Carmel Branston

Queen's University ( email )

Kingston, Ontario K7L 3N6
Canada

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