The Role of Ethical Climate in Fraud
43 Pages Posted: 18 Jan 2012
Date Written: January 11, 2012
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: Suggested Citation