F RA U D I N A C CO U N T I N G ,
O RG A N I ZATI O N S , S O C I ET Y
: EX TEN D I N G T H E BO U N D A RI ES O F
RE S EA R CH
By :
Yougie PMP
Budi Lutfira
WHAT IS FRAUD ?
• Fraud is the act of intentionally deceiving someone for personal gain. It is not
an accidental error, but a deliberate misrepresentation of the truth. (Joel G.
Siegel dan Jae K. Shim)
WHAT IS FRAUD ?
• According to the Association of Certified Fraud Examiners (ACFE), fraud
includes:
1. Corruption (such as conflicts of interest and bribery)
2. Asset misappropriation (through theft or illegal diversions of cash or other
assets)
3. Financial statement fraud (such as asset/revenue overstatement or
understatement)
PURPOSE OF THE RESEARCH
• The goal of this essay and this special issue is to address some of these limited
perspectives, and to suggest lines for future research. Specifically, this essay is
intended to expand the range of perspectives used to understand fraud and to
examine behaviors and practices that are typically under researched in
accounting
PURPOSE OF THE RESEARCH
Themes for the research :
• The importance of contextualizing fraud
• The social construction of fraud and associated categories of wrongdoing
(including the effects of such definitional work)
• The recognition that fraud takes place in multiple domains, such as the
individual, the firm, the organizational field and societies more generally.
RESEARCH OUTLINE
• Review the main research traditions on fraud and wrongdoing
• Offering comments on current research on fraud in accounting and auditing.
• Review the papers in this special issue, highlighting their commonalities and
specific contributions
EXAMINING FRAUD AND
WRONGDOING
• Berger (2011) usefully distinguishes between macro, micro and individual
approaches to discuss corporate and government crime and fraud. We identify
four broad aspects of fraud on which researchers have focused:
1. The decision to engage in fraud,
2. The temporally evolving character of frauds
3. The context in which frauds occur
4. The effects of fraud and wrongdoing
DECISION MAKING
Decision making approaches, focused on the choices made to commit or
contribute (or not) to fraud, to whistle blow on suspected frauds, or choices by
auditors in identifying fraud, is rooted in decision making theories
DECISION MAKING THEORIES
• Rational choice theory recognizes the importance of risk and attitudes to risk,
and has developed agency and game theory in economics
• Behavioral decision theory that relaxes the rationality assumption
• Garbage can models of decision making
TEMPORALITY
• Fraud can be understood either as a onetime phenomenon or as a process where
actions and decisions develop over time, and where there might be feedback,
temporal dynamics and/or emotional elements.
CONTEXT
3 approaches
• administrative structures approach that pervade organizations and governments
• A cultural approach
• An institutional approach
A D MI N IS T RAT IV E S T RU CT URES A PPRO A CH TH AT
PERVA D E ORG A NI Z ATI O N S A N D G O VERN MEN TS
Economic models of organizations and government place particular emphasis on
governance, incentives and monitoring systems. Research on administrative
structures also typically distinguishes obtrusive controls (such as governance
mechanisms, rules, standard operating procedures) and unobtrusive controls (such
as schemas and scripts and the controls implicit in technologies).
A CULTURAL APPROACH
A cultural approach to context assumes that actors are situated in collectivities
that share the same assumptions, norms, values and beliefs about the nature of the
world they inhabit. A concern with culture can be extended to consider context in
terms of fields of ideas, traditions, habits, and taken for granted practices. For
nation states, context is also often understood as national or tribal culture,
although forms of economic or social organization, such as particular versions of
capitalism, feudalism, tribalism and so on, could be thought of as cultural.
AN INSTITUTIONAL APPROACH
An institutional approach has become a dominant social science understanding of
context (Hodgson, 1998; North, 1981; Scott, 2001). It emphasizes the fields that
actors are embedded within, whether the habitus of individuals, the industry of
organizations or the traditions and norms of societies. A popular view of
institutions emphasizes three dimensions (Scott, 2001). The first consists of
regulative structures (including governance, legal and administrative regimes), the
second consists of normative structures (incorporating culture and moral codes),
and the third emphasizes cognitive structures (which includes the ‘‘logics’’ and
taken for granted understandings of the world). Studies of institutions emphasize
how actions and interactions are embedded in practices, structures and traditions.
EFFECT
• The first prominent area is the extensive body of capital market research that
examines stock market reactions to various forms of earnings manipulation by
firms, many of which might be considered fraudulent, as well as more
• A second major area of accounting and related research concerning effects
examines corruption, although research on corruption also indicates the
importance of contextualizing corrupt activities. Much of the initial impetus for
analyses of corruption arose of the concerns about corporate corruption,
particularly by multinationals
CONTRIBUTION TO THE SPECIAL
ISSUE
Braithwaite’s work (2005) on tax avoidance and evasion highlights the varieties
of boundary work used by Australian and US tax lawyers and regulators in
working their respective tax systems and rules. Braithwaite (this issue) can be
seen as an attempt to change attitudes and incentives to disclose in relation to tax
schemes; in his words, to shift from markets in vice to markets in virtue.
THE RECOGNITION THAT FRAUD
TAKES PLACE IN MULTIPLE DOMAINS
Three potential areas :
• Fraud and corrupt practices vary across institutional contexts
• In many organizations, there exists a tremendous amount of ‘‘everyday’’ fraud.
• An examination of the role of networks in terms of both the promotion and
prevention of fraud
