ISSN: 2225-8329
Open access
Many of the world’s most prominent organizations have experienced large-scale frauds. These frauds have had disturbing effects on our world’s economy in addition to contributing unnecessary suffering and increased unemployment for the low and middle class. With the aim of further understanding the fundamental motivations of fraud, this paper takes an in-depth look at the convergent and divergent of two classical fraud theories which are: (i) fraud triangle theory; and (ii) fraud diamond theory. This comparison is important to assist anti-graft bodies and organizations in formulating a practical strategy to prevent and investigate organizational frauds. The paper takes a conceptual approach by first examining the concept of fraud, then discussing the convergence of the two classical theories, and finally differentiating them. By doing so, the similarities and differences between them are highlighted and appreciated for fraud prevention purposes. The study uses secondary sources of information obtained from journal articles, textbooks and the internet. The discussion of the two theories contributes to the understanding of frauds especially by forensic accountants, auditors, fraud examiners and other anti-fraud bodies. The study also serves as guidance for further fraud related research.
Abdullahi, R., and Mansor, N. (2015a). Concomitant Debacle of Fraud Incidences in the Nigeria Public Sector: Understanding the Power of Fraud Triangle Theory. International Journal of Academic Research in Business and Social Sciences, Vol. 5, No. 5, pp, 312-326.
Abdullahi, R., and Mansor, N. (2015b). Forensic Accounting and Fraud Risk Factors: The Influence of Fraud Diamond Theory. The American Journal of Innovative Research and Applied Sciences. 1(5):186-192.
Albrecht, W. S., Albrecht, C., & Albrecht, C. C. (2008). Current Trends in Fraud and its Detection: A Global Perspective. Information Security Journal Vol.17. Retrieved from www.ebscohost.com on 11th June, 2014.
Association of Certified Fraud Examiners. (2010). Report to the Nation on Occupational Fraud. Retrieved May 26, 2014, https://acfe.com/ documents/2010RttN.pdf
Bierstaker, J. L., Brody, R. G., & Pacini C. (2006). Accountants’ perceptions regarding fraud detection and prevention methods. Managerial Auditing Journal Vol. 21 No. 5 pp. 520-535.
Chen, K. Y., & Elder, R. J. (2007). Fraud Risk Factors and the Likelihood of Fraudulent Financial Reporting: Evidence from Statement on Auditing Standards No. 43 in Taiwan, Working paper.
Cressey, D. R. (1953). Other People’s Money. Montclair, NJ: Patterson Smith, pp.1-300.
Dorminey, J., Fleming, A., Kranacher, M., & Riley, R. (2010). Beyond the fraud triangle: The CPA Journal, 80(7), 17-23.
Duffield, G., & Grabosky, P. (2001). The psychology of fraud. Trends and issues in crime and criminal justice. Australian Institute of Criminology, Canberra.
Ernst & Young. (2009). Detecting financial statement fraud. Retrieved: 2 August 2014 from http: www.ey.com/Publication/vwLUAssets/FIDSFI Detecting Financial Statement Fraud.pdf/$FILE/FIDS-FI_detectingFinanceStatementFraud.pdf.
Ewa, U. E., & Udoayang, J. O. (2012). The Impact Of Internal Control Design On Banks’ Ability To Investigate Staff Fraud, And Life Style And Fraud Detection In Nigeria International Journal of Research in Economics & Social Sciences Volume 2, Issue 2 pp.32-44
Fazli, S. A., Mohd, T. I., & Mohamed, M. Z. (2014). Fraud Risk Factors of Fraud Triangle and the Likelihood of Fraud Occurrence: Evidence from Malaysia. Information Management and Business Review Vol. 6, No. 1, pp. 1-7, (ISSN 2220-3796).
Florenz, C. T. (2012), Exploring a New Element of Fraud: A Study on Selected Financial Accounting Fraud Cases in the World. American International Journal of Contemporary Research Vol. 2 No. 6; pp. 112-121.
Gbegi, D. O., & Adebisi, J. F. (2013). The New Fraud Diamond Model - How can it help forensic accountants in fraud investigation in Nigeria? European Journal of Accounting Auditing and Fiancé Research Vol.1, No. 4, pp.129-138,
Hooper, M. J., & Pornelli, C. M. (2010). Deterring and detecting financial fraud: A platform for action. http://www.thecaq.org/docs/reports-and-publications/deterring-and-detecting financial-reporting-fraud-a-platform-for-action.pdf? Retrieved on 2 August 2014.
Kelly, P., and Hartley, C. A. (2010). Casino gambling and workplace fraud: a cautionary tale for managers. Management Research Review , Vol. 33, No. 3, 224-239.
Kenyon, W., and Tilton, P. D. (2006). Potential red flags and fraud detection techniques: A Guide to Forensic Accounting Investigation, First Edition, John Wiley & Sons, Inc, New Jersey.
Kiragu, D. N., Wanjau, K. L., Gekara, M., & Kanali, C. (2013). Effects of bank growth on occupational fraud risks in commercial banks in Kenya. International Journal of Social Sciences and Entrepreneurship, 1 (3), 469-480.
Levi, M. (2008). Organized frauds and organizing frauds: unpacking the research on networks and organization. Journal of Criminology and Criminal Justice, (7), 389-419.
Lister, L. M. (2007). A Practical Approach to Fraud Risk: Internal Auditors.
Mackevicius, J., & Giriunas, L. (2013). Transformational Research of the Fraud Triangle, ISSN Vol. 92(4) EKONOMICA, pp. 150-163.
Manurung, D. T. H., & Hadian, N. (2013). Detection Fraud of Financial Statement with Fraud Triangle. Proceedings of the 23rd International Business Research Conference, pp. 18-20 Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8.
Ming, J. J., & Wong, T. J. (2003). Earnings management and tunnelling through related party transactions: Evidence from Chinese corporate groups. EFA 2003 Annual Conference, Paper No.549.
Moyes, G., Lin, P., & Landry-Jr, R. (2005). Raise the red flag: Internal Auditor, October: 47-51.
Murdock, H. (2008). The Three Dimensions of Fraud: Internal Auditors. Retrieved on June 22, 2014 from www.emerald.com.
Normah, B. O., & Hesri, F. M. D. (2010). Fraud Diamond Risk Indicator: An Assessment of Its Importance and Usage, International Conference on Science and Social Research (CSSR 2010), Kuala Lumpur, Malaysia pp. 607-612.
Okezie, A. (2012). An Analysis of Fraud in Nigerian Banks. American Charter of Economics and Finance, Vol. 1 No. 2 pp. 60-73.
Peterson, B. K., & Buckhoff, T. A. (2004). Anti-fraud education in academia. Advances in Accounting Education: Teaching and Curriculum Innovations, Vol. 6, pp. 45-67.
Rae, K., & Subramaniam, N. (2008), Quality of internal control procedures: Antecedents and moderating effect on organisational justice and employee fraud. Managerial Auditing Journal, 23(2), 104-124.
Rasha, K., & Andrew, H. (2012). The New Fraud Triangle, Journal of Emerging Trends in Economics and Management Sciences, Vol. 3(3): Retrieved from google.com July 13, 2014.
Rezaee, Z., Crumbley, D. L., & Elmore, R. C. (2004). Forensic accounting education. Advances in Accounting Education: Teaching and Curriculum Innovations, Vol. 6, pp. 193-231.
Singleton, T. W., Bologna, G. J., Lindquist, R. J., & Singleton, A. J. (2006). Fraud auditing and forensic accounting, 3rd Ed., John Wiley & Sons, Inc, New Jersey.
Smith, M., Omar, N., Sayed, I. S. I. and Baharuddin, I. (2005). Auditors' perception of fraud risk indicators: Malaysian Evidence. Managerial Auditing Journal , Vol. 20, No. 1, 73-85.
Srivastava, R. P., Mock T. J., & Turner, J. L. (2005). Fraud Risk Formulas for Financial Statement Audits. Australian National University Business and Information Management Auditing Research Workshop and from Gary Monroe, Lei Gao and Lili Sun. pp. 1-48
Thanasak, R. (2013). The Fraud Factors. International Journal of Management and Administrative Sciences (IJMAS) (ISSN: 2225-7225) Vol. 2, No. 2, pp. 01-05.
Vance, S. (1983). Corporate leadership: Boards, directors and strategy. New York: McGraw-Hill.
Vona, I. W. (2008). Fraud Risk Assessment: Building a Fraud Audit Programme: Hoboken, New Jersey: John Wiley and Sons.
Wells, J. T. (2005). Principles of fraud examination. Hoboken, N.J.: John Wiley & Sons Inc.
Wells, J. T. (2011). Corporate Fraud Handbook: Prevention and Detection: 3rd Edition: Hoboken, New Jersey: John Wiley & Sons Inc.
Wilks, T. J., & Zimbelman, M. F. (2004). Decomposition of Fraud-Risk Assessments and Auditors’ Sensitivity to Fraud Cues. Contemporary Accounting Research, 21(3), 719-745.
Wilson, I. (2007), Regulatory and institutional challenges of corporate governance in Nigeria post consolidation. Nigerian Economic Summit Group (NESG) Economic Indicators, April-June, Vol. 12, No 2
Wolfe, D., & Hermanson, D. R. (2004). The fraud diamond: Considering four elements of fraud. The CPA Journal, 74 (12), 38-42.
In-Text Citation: (Abdullahi & Mansor, 2015)
To Cite this Article: Abdullahi, R., & Mansor, N. (2015). Fraud Triangle Theory and Fraud Diamond Theory. Understanding the Convergent and Divergent For Future Research. International Journal of Academic Research in Accounting Finance and Management Sciences, 5(4), 54–64.
Copyright: © 2015 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode