Forensic Accounting, Fraud Theory, and the End of the Fraud Triangle

Abstract

Defenders of the fraud triangle have risen to the challenges of the many criticisms of the fraud triangle, mostly be ignoring them. Criticisms notwithstanding, the fraud triangle has endured and has formed the basis of fraud theory since its origination to this day.

Yet, the elements of the fraud triangle (or any geometric shape of choice) as originally developed and modified, have been misused, abused, contorted, stretched out of shape, and pressed into uses for which it was never intended and cannot possibly accommodate.

This paper analyzes the geometry of fraud theory and argues that forensic accounting researchers and practitioners must recognize it cannot explain fraud and must consider that there are n-dimensions of financial crime that must be accounted for in any model that attempts to explain, predict, prevent, detect, and prosecute financial crimes, of which fraud is merely a subset.

Keywords: forensic accounting, fraud triangle, fraud diamond, fraud theory, financial crimes, fraud

JEL Classification: M4, M40, M41, M49