The Ties that Bind: The Decision to Co-Offend in Fraud

56 Pages Posted: 8 Jun 2013 Last revised: 24 Jun 2013

See all articles by Clinton Free

Clinton Free

UNSW Australia Business School, School of Accounting

Pamela R. Murphy

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

Date Written: June 7, 2013

Abstract

It is frequently observed that fraud has a greater economic impact on society than any other category of crime. Arguing that both research and practitioner frameworks in auditing and forensic accounting have tended to adopt an individualizing perspective predicated primarily on solo-offending, this article adopts an inductive approach to consider why individuals co-offend in fraud. It reports the results of a set of interviews with 37 individuals convicted of a range of frauds including financial statement fraud, insider trading, credit card fraud, money laundering and asset misappropriation. In each instance, the fraud was perpetrated by a group of two or more co-offenders. Based on inductive, exploratory case coding, we find that reasons for co-offending vary according to the type of bond that exists between co-offenders. Two dimensions of fraudulent co-offending are identified – the primary beneficiary of the fraud and the nature of group attachment – to derive three distinct archetypes of bonds between co-offenders: (i) individual-serving functional bonds, (ii) organization-serving functional bonds and (iii) affective bonds. Key elements of each archetype as well as their impact on the decision to co-offend are examined. Our findings suggest that the social nature of fraud is not merely an incidental feature of the crime, but is instead a potential key to understanding its etiology and some of its distinctive features. They also support the need for diagnostic tools to move beyond individualistic analyses of fraud toward a broader, group sensitive assessment of fraud risk.

Keywords: Fraud, Co-offending, Functional Bonds, Affective Bonds, Fraud Triangle

JEL Classification: M40

Suggested Citation

Free, Clinton Wallace and Murphy, Pamela R., The Ties that Bind: The Decision to Co-Offend in Fraud (June 7, 2013). Available at SSRN: https://ssrn.com/abstract=2275750 or http://dx.doi.org/10.2139/ssrn.2275750

Clinton Wallace Free (Contact Author)

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

Pamela R. Murphy

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)

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