Fraud Triangle from the Perspective of Accountants in the Czech Republic

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F70883521%3A28120%2F20%3A63525259" target="_blank" >RIV/70883521:28120/20:63525259 - isvavai.cz</a>

Result on the web

<a href="https://link.springer.com/article/10.1007%2Fs11294-020-09801-4" target="_blank" >https://link.springer.com/article/10.1007%2Fs11294-020-09801-4</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1007/s11294-020-09801-4" target="_blank" >10.1007/s11294-020-09801-4</a>

Result language

angličtina

Original language name

Fraud Triangle from the Perspective of Accountants in the Czech Republic

Original language description

Companies consider the risk of fraud to be insignificant. Therefore, they take few or no preventive measures. However, rationalizations, opportunities and motivations for fraud might be present in all firms. Fraud triangle model theory (Cressey, American Journal of Sociology, 1954) has been utilized in various studies. Authors (Loebbecke et al., A Journal of Practice and Theory, 1989) have used this theory to find the best model for assessing and detecting fraud (Smith, Managerial Auditing Journal, 2005). Various analytic procedures for fraud measurement have been used to predict fraudulent behaviour (Blocher, The Role of Analytical Procedures in Detecting Management Fraud, 1992) and detect the probability of accountants committing fraud (Kwan and Kwan, International Review of Business Research Papers, 2011). Literature reviews and current trends in fraud (Albrecht et al., Information Security Journal a Global Perspective, 2008) have identified fraud triangle peaks and industry differences depending on the length of time an accountant has been in practice, the level of education achieved and the possibility of penalties. Generally, conducting fraud and delinquency research has proven to be challenging and problematic, although this type of research is vital for all enterprises. Similar research has not been completed in the Czech Republic. Therefore, this study will extend the existing literature to include conditions in the Czech Republic. Three research questions have been identified: 1) Are there any circumstances in the company that provide the most opportunities for accounting fraud? (opportunity peak); 2) What are the most common reasons for accounting fraud? (motivation peak); and 3) Do accountants have a legitimate reason to believe that when others cheat, they can do the same? (rationalization peak). These research questions are in line with previous research (Baxevani and Mylonas, Scientific Bulletin – Economic Sciences, 2014; Kolman, The Internal Auditor, 2007), which serves as a baseline for the creation of this research survey. The survey was conducted in 2018 and 2019. A total of 337 accountants and accounting companies in the Czech Republic completed the 18-question online survey with an approximate completion time of 10 minutes. Accounting companies were asked to have the chief account complete the survey. Each potential participant was contacted only once and 128 responses were received (response rate: 38%). Theresultsofqualitativeandquantitativepreliminaryresearchsuggestedmethodsof identifying or eliminating potential fraud threats. The dataset was evaluated using descriptive statistics, a one-sample test of proportions and a chi-square test of independence at a 5% significance level. Research demonstrated that the most frequent opportunities for committing accounting fraud are weak internal control in the company (44.5%), non-segregation of duties (21.1%) and uneven management and ineffective monitoring by the company management (19.5%). The statistical relationship between these opportunities for accounting fraud and education of accountants has not been confirmed (χ2(3)=2.854, p=0.415). The most common reasons for committing accounting fraud included personal reasons of the managers (16%), efforts to meet the goals of parent companies (15.4%) and market expectations (15.4%). Only university-educated accountants considered market expectations to be a significant motive for accounting fraud (p&lt;0.001). These findings are consistent with a study conducted by Baxevani and Mylonas (Scientific Bulletin – Economic Sciences, 2014), where the personal reasons of the managers were the most frequently mentioned motives for committing fraud. Only 19% (24 respondents) knew about accounting fraud in other companies. Seventy-four percent (95 respondents) considered fraud to be important and only 7% (9 respondents) claimed that accounting fraud is not important to them. It is assumed that this last group of accountants might be potential perpetrators of accounting fraud. This assumption is based on Syofyan et al. (Advances in Economics, Business and Management Research, 2019, p.2): “many of fraudulents do not understand that they have done a kind of fraud, they did not become aware of it”. The research findings suggest this opinion may be true. However, the opinion of nine accountants is negligible. One cannot say that these accountants actually committed accounting fraud. The vulnerabilities of the fraud triangle, and thus the results, could help companies take measures to strengthen controls as well as lead to the earlier discovery of instances of fraud. The conclusions could also be important for further development of more indepthprotectionsagainst fraudwithincompanies.Such protectioncan beinthe formof internal auditing or instituting a special supervisory department.

Czech name

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Czech description

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Type

J_SC - Article in a specialist periodical, which is included in the SCOPUS database

CEP classification

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OECD FORD branch

50205 - Accounting

Project

—

Continuities

V - Vyzkumna aktivita podporovana z jinych verejnych zdroju

Publication year

2020

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

International Advances in Economic Research

ISSN

1083-0898

e-ISSN

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Volume of the periodical

neuveden

Issue of the periodical within the volume

26

Country of publishing house

US - UNITED STATES

Number of pages

2

Pages from-to

451-452

UT code for WoS article

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EID of the result in the Scopus database

2-s2.0-85090939882