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    The construction of the risky individual and vigilant...
    research summary posted November 17, 2014 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.01 Fraud Risk Assessment, 06.02 Fraud Risk Models 
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    Title:
    The construction of the risky individual and vigilant organization: A genealogy of the fraud triangle
    Practical Implications:

    What appears as a technical and neutral device, that is to say the fraud triangle, actually promotes a vision of fraud anchored in both the individual and the organization, while downplaying the social, political and cultural explanations of fraud. At the end of the day, we are confronted with a series of representations, which lie at the heart of the professional work of a range of actors in the economy, that lead us to view fraud through the lens of individual transgressions being perpetrated while leaving the systemic and socio-political aspects of fraud unchallenged. Would fraud prevention gain in effectiveness if these neglected aspects were dealt with more explicitly? The paper provides reflexivity to practitioners that might help them understand and question the normative and moralizing assumptions that underlie the devices they use.

    For more information on this study, please contact Jérémy Morales.

    Citation:

    Morales, J., Gendron, Y. and H. Guénin-Paracini. 2014. The construction of the risky individual and vigilant organization: A genealogy of the fraud triangle. Accounting, Organizations and Society 39 (3): 170-194

    Keywords:
    Organizational fraud, Fraud triangle, Fraud Risk, ACFE (Association of Certified Fraud Examiners), Auditors, Morality.
    Purpose of the Study:

    This article aims to examine how a vision of organizational fraud has been constructed around a particular technology, the fraud triangle.

    The analysis focuses on the chain of translations surrounding the triangle, examining some of its antecedents (in criminology), its initial formulation (in the emerging fraud examination community), and how it extended its influence beyond that community while being reinterpreted in diverse ways (in auditing, risk management and corporate governance domains).

    Our primary interest is not how the fraud triangle is technically used to detect fraud, but how its conceptualization and the underlying constitution of a field of knowledge have been structured around specific angles. A key goal of the study is to trace the normative assumptions that underlie the association between fraud and morality. We show that these assumptions form the basis of a discourse, not only about fraud detection and deterrence but also about normality and deviance within organizations. 

    Design/Method/ Approach:

    Our genealogy of the fraud triangle is carried out through a documentation study. We especially analyzed:

    • A pivotal practitioner book, which articulates connections between the nascent field of fraud examination and the discipline of criminology: Occupational Fraud and Abuse, by Joseph Wells (1997).
    • A number of documents connected to the ACFE, including Albrecht and Albrecht’s book entitled Fraud Examination & Prevention (2004) whose first author was ACFE’s first president.
    • Books written by well-known criminologists, such as Sutherland and Cressey.
    • SAS99 and ISA240.
    • 64 papers published primarily in academic journals, but also in a professional and hybrid journals.
    • Key documents in the risk management, professionally-based literature, issued by major accounting organizations, such as the AICPA (American Institute of Certified Public Accountants), the CIMA (Chartered Institute of Management Accountants), the CAQ (Center for Audit Quality) and the Big Four audit firms.
    Findings:
    • Our analysis indicates that fraud triangle articulations privilege individualistic explanations of fraud to the detriment of sociological explanations that highlight fraud’s sociopolitical nature and locate its causes in institutional and historical arrangements. Instead, the fraud triangle focuses attention on the fragility of individual morality and establishes the organization’s duties in controlling “risky individuals.”
    • One of our main points is that the fraud triangle constitutes a rhetorical tool that professional associations have used to create and consolidate a field of knowledge and intervention around individual morality. Our analysis brings to the fore translations representing the fraud triangle as a credible technology that allows fraud specialists to speak authoritatively and intervene, in certain ways, in organizational fraud. In so doing, a certain discourse of normality gains legitimacy through the recruitment of allies around (and fabrication of) a concept that appears to be technical and descriptive, but contains a very specific vision of fraud.
    Category:
    Risk & Risk Management - Including Fraud Risk
    Sub-category:
    Fraud Risk Assessment, Fraud Risk Models