Employee perceptions of organization culture with respect to fraud – where to look and what to look for

Kuldeep Kumar, Sukanto Bhattacharya, Richard E. Hicks

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)
81 Downloads (Pure)

Abstract

Purpose
Recent research has confirmed an underlying economic logic that connects each of the three vertices of the “fraud triangle” – a fundamental criminological model of factors driving occupational fraud. It is postulated that in the presence of economic motivation and opportunity (the first two vertices of the fraud triangle), the likelihood of an occupational fraud happening in an organization increases substantially if the overall organization culture is perceived as being slack towards fraud as it helps potential fraudsters in rationalizing their actions (rationalization being the third vertex of the fraud triangle).This paper offers a viable approach for collecting and processing of data in order to identify and operationalize the key factors underlying employee perception of organization culture towards occupational frauds.

Design/methodology/approach
This paper reports and analyses the results of a pilot study conducted using a convenience sampling approach to identify and operationalize the key factors underlying employee perception of organization culture with respect to occupational frauds. Given a very small sample size, a numerical testing technique based on the binomial distribution has been applied to test for significance of the proportion of respondents who agree that a lenient organizational culture towards fraud can create a rationalization for fraud.

Findings
The null hypothesis assumed no difference in the population proportions between those who agree and those who disagree with the view that a lenient organizational culture towards fraud can create a rationalization for fraud. Based on the results of the numerical test, the null hypothesis is rejected in favour of the alternative that the population proportion of those who agree with the stated view in fact exceeded the proportion of those who disagreed.

Research limitations/implications
The obvious limitation is the very small size of the sample obtained due to an extremely low rate of response to the survey questionnaires. However, while of course a much bigger data set needs to be collected in order to develop a generalizable prediction model, the small sample was enough for the purpose of a pilot study.

Practical implications
This paper makes two distinct practical contributions. Firstly, it posits a viable empirical research plan for identifying, collecting and processing the right data to identify and operationalize the key underlying factors that capture an employee’s perception of organizational culture towards fraud as a basis for rationalizing an act of fraud. Secondly, it demonstrates via a small-scale pilot study, that a more broad-based survey can indeed prove to be extremely useful in collating the sort of data that is needed to develop a computational model for predicting the likelihood of occupational fraud in any organization.

Originality/value
This paper provides a viable framework which empirical researchers can follow in order to test some of the latest advances in the “fraud triangle” theory. It outlines a systematic and focused data collection method via a well-designed questionnaire that is effectively applicable to future surveys that are scaled up to collect data at a nationwide level.
Original languageEnglish
Pages (from-to)187-198
Number of pages12
JournalPacific Accounting Review
Volume30
Issue number2
Early online dateMar 2018
DOIs
Publication statusPublished - 2018

Fingerprint

Organization culture
Fraud
Employee perceptions
Proportion
Factors
Organizational culture
Rationalization
Economics
Small sample
Data collection
Prediction model
Empirical research
Questionnaire
Testing
Logic
Questionnaire survey
Design methodology
Sampling
Computational model
Sample size

Cite this

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title = "Employee perceptions of organization culture with respect to fraud – where to look and what to look for",
abstract = "PurposeRecent research has confirmed an underlying economic logic that connects each of the three vertices of the “fraud triangle” – a fundamental criminological model of factors driving occupational fraud. It is postulated that in the presence of economic motivation and opportunity (the first two vertices of the fraud triangle), the likelihood of an occupational fraud happening in an organization increases substantially if the overall organization culture is perceived as being slack towards fraud as it helps potential fraudsters in rationalizing their actions (rationalization being the third vertex of the fraud triangle).This paper offers a viable approach for collecting and processing of data in order to identify and operationalize the key factors underlying employee perception of organization culture towards occupational frauds.Design/methodology/approachThis paper reports and analyses the results of a pilot study conducted using a convenience sampling approach to identify and operationalize the key factors underlying employee perception of organization culture with respect to occupational frauds. Given a very small sample size, a numerical testing technique based on the binomial distribution has been applied to test for significance of the proportion of respondents who agree that a lenient organizational culture towards fraud can create a rationalization for fraud.FindingsThe null hypothesis assumed no difference in the population proportions between those who agree and those who disagree with the view that a lenient organizational culture towards fraud can create a rationalization for fraud. Based on the results of the numerical test, the null hypothesis is rejected in favour of the alternative that the population proportion of those who agree with the stated view in fact exceeded the proportion of those who disagreed.Research limitations/implicationsThe obvious limitation is the very small size of the sample obtained due to an extremely low rate of response to the survey questionnaires. However, while of course a much bigger data set needs to be collected in order to develop a generalizable prediction model, the small sample was enough for the purpose of a pilot study.Practical implicationsThis paper makes two distinct practical contributions. Firstly, it posits a viable empirical research plan for identifying, collecting and processing the right data to identify and operationalize the key underlying factors that capture an employee’s perception of organizational culture towards fraud as a basis for rationalizing an act of fraud. Secondly, it demonstrates via a small-scale pilot study, that a more broad-based survey can indeed prove to be extremely useful in collating the sort of data that is needed to develop a computational model for predicting the likelihood of occupational fraud in any organization.Originality/valueThis paper provides a viable framework which empirical researchers can follow in order to test some of the latest advances in the “fraud triangle” theory. It outlines a systematic and focused data collection method via a well-designed questionnaire that is effectively applicable to future surveys that are scaled up to collect data at a nationwide level.",
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Employee perceptions of organization culture with respect to fraud – where to look and what to look for. / Kumar, Kuldeep; Bhattacharya, Sukanto; Hicks, Richard E.

In: Pacific Accounting Review, Vol. 30, No. 2, 2018, p. 187-198.

Research output: Contribution to journalArticleResearchpeer-review

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N2 - PurposeRecent research has confirmed an underlying economic logic that connects each of the three vertices of the “fraud triangle” – a fundamental criminological model of factors driving occupational fraud. It is postulated that in the presence of economic motivation and opportunity (the first two vertices of the fraud triangle), the likelihood of an occupational fraud happening in an organization increases substantially if the overall organization culture is perceived as being slack towards fraud as it helps potential fraudsters in rationalizing their actions (rationalization being the third vertex of the fraud triangle).This paper offers a viable approach for collecting and processing of data in order to identify and operationalize the key factors underlying employee perception of organization culture towards occupational frauds.Design/methodology/approachThis paper reports and analyses the results of a pilot study conducted using a convenience sampling approach to identify and operationalize the key factors underlying employee perception of organization culture with respect to occupational frauds. Given a very small sample size, a numerical testing technique based on the binomial distribution has been applied to test for significance of the proportion of respondents who agree that a lenient organizational culture towards fraud can create a rationalization for fraud.FindingsThe null hypothesis assumed no difference in the population proportions between those who agree and those who disagree with the view that a lenient organizational culture towards fraud can create a rationalization for fraud. Based on the results of the numerical test, the null hypothesis is rejected in favour of the alternative that the population proportion of those who agree with the stated view in fact exceeded the proportion of those who disagreed.Research limitations/implicationsThe obvious limitation is the very small size of the sample obtained due to an extremely low rate of response to the survey questionnaires. However, while of course a much bigger data set needs to be collected in order to develop a generalizable prediction model, the small sample was enough for the purpose of a pilot study.Practical implicationsThis paper makes two distinct practical contributions. Firstly, it posits a viable empirical research plan for identifying, collecting and processing the right data to identify and operationalize the key underlying factors that capture an employee’s perception of organizational culture towards fraud as a basis for rationalizing an act of fraud. Secondly, it demonstrates via a small-scale pilot study, that a more broad-based survey can indeed prove to be extremely useful in collating the sort of data that is needed to develop a computational model for predicting the likelihood of occupational fraud in any organization.Originality/valueThis paper provides a viable framework which empirical researchers can follow in order to test some of the latest advances in the “fraud triangle” theory. It outlines a systematic and focused data collection method via a well-designed questionnaire that is effectively applicable to future surveys that are scaled up to collect data at a nationwide level.

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