The Effect of Fraud Diamond Capability Measures on Fraud Occurrence

Barbara M. Arel · Michael J. Tomas · Larry Stark

9 citations0/0 files storedJournal of Forensic Accounting Research

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Ethics in Business and Education Financial Literacy and Behavior Corporate Governance and Financial Management

Abstract

ABSTRACT An organization can lose up to 5 percent of its revenue to fraud (ACFE 2020) making the ability to effectively prevent and detect accounting fraud essential to many stakeholders. Auditors typically use the fraud triangle framework consisting of pressure, opportunity and rationalization to understand fraud risks factors. The fraud diamond extends the fraud triangle to include an additional risk factor, capability (Wolfe and Hermanson 2004). This study uses an experimental task to analyze the effect of individual fraud diamond components of capability on the likelihood of committing fraud. The results show that capability components of ego, intelligence, and ability to cope with stress significantly influence the likelihood of committing fraud. Results also show including fraud diamond capability components improve the ability to predict the likelihood of fraud. Data Availability: The data that support the findings of this study are available from the first author upon request.

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1951Coefficient Alpha and the Internal Structure of Tests 1988A principal-components analysis of the Narcissistic Personality Inventory and further evidence of its construct validity.2008The Dishonesty of Honest People: A Theory of Self-Concept Maintenance 2004The Fraud Diamond: Considering the Four Elements of Fraud 1984Factor Analysis and Construct Validity of the Narcissistic Personality Inventory\2004Narcissism, confidence, and risk attitude 2011The dark side of creativity: Original thinkers can be more dishonest.2003Exploring Social Desirability Bias

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