Enhancing the auditor\u27s fraud detection ability: An interdisciplinary approach

A contemporary issue of concern to both external auditors and financial statement users is fraud-detection by auditors. The ability of auditors to detect material irregularities, including fraud, should be enhanced to enable them to apply reasonable skill and care in carrying out the audit. Such proficiency in fraud detection is needed if the profession is to avoid costly litigation, ever-increasing indemnity insurance and erosion of the profession\u27s credibility. The thesis maintains that such enhancement can be achieved if auditors both utilise knowledge about the aetiology of fraud in psychology, sociology and criminology as well as by synthesising a broad range of approaches to fraud detection. The multidisciplinary discussion of the aetiology of fraud enabled the development of a three-component model. The model\u27s three components are: rationalisations (R), opportunity (0) and a crime-prone motivated person (P), hence the acronym ROP. Next, a close examination of relevant auditing guidelines and a number of fraud detection models that have been proposed were used to develop an eclectic fraud detection model (with the ROP model as one of its components). The applicability of the ROP model was determined in a study of 50 major fraud cases investigated and prosecuted by the Major Fraud Group (MFG) of the Victoria police. The study identified a number of inter-relationships between offence, offender and victim characteristics. The findings obtained also confirmed the applicability of the model in the field and yielded a two-level criminal profile of serious fraud offenders which includes a new taxonomy of such offenders. The taxonomy consists of twelve specific typologies. In addition, the MFG study findings cast doubt (I) on Gottfredson and Hirschi\u27s (1990) assertion in their General Theory of Crime that white-collar offenders are not significantly different from common offenders and (2) on a basic premise of Loebbecke et al.\u27s (1989) fraud risk-assessment model that all three components of their model need to be present for fraud to occur. The experience of auditors with detecting six different types of material irregularities, including management fraud, employ fraud and error, was investigated in a postal survey of 108 auditors. The findings provide support for the applicability of the eclectic fraud detection model. The survey also found that: it is rare for even experienced auditors to encounter material irregularities; that different types of irregularity (e.g., management fraud) occur more frequently in some industries (manufacturing and construction) than in others; the irregularity is likely to take one form (e.g., window dressing and misappropriation of funds) rather than another; and management review and tests of controls are more likely to alert an auditor to the existence of management fraud. In support of earlier research findings, data analysis revealed that the lack of an effective internal control system and the absence of a code of corporate conduct are statistically significant correlates of an irregularity having a material impact on the financial accounts of a company. In contrast to claims by Loebbecke et al. (1989), the survey findings show that fraud risk-assessment utilising red flags alone is not effective and the presence of only two (and not all three) of their model\u27s components need to be present for management fraud to occur. Both the ROP model and the eclectic fraud detection model were further refined in the light of the findings from the two empirical studies. Without ignoring limitations of the two surveys, the work reported in the present thesis sheds new light on the aetiology of fraud, shows that neither audit experience nor red flags alone is sufficient to improve auditors\u27 fraud detection performance and provide another dimension to fraud risk- assessment. The new knowledge should be added to the auditor\u27s armoury to enhance the audit effectiveness and efficiency and to reduce the fraud detection component of the expectation gap

Fraud and corruption in football: lessons from a survey of match-fixing in Cyprus

Purpose The purpose of this paper is to identify if fraud theory models suggested over the years are applicable to match-fixing and if so, whether the Krambia-Kapardis’ (2016) holistic fraud and corruption prevention model can be used to reduce significantly match-fixing in football. Design/methodology/approach An online survey was developed by the authors and was administered to football stakeholders in Cyprus, namely, players, referees, coaches and team management. Findings The research questions, who are the initiators of match-fixing, why is match-fixing taking place and what is the best way to prevent or reduce match-fixing, have been answered, and these findings have enabled the authors to make policy recommendations. Research limitations/implications The survey considered match-fixing in only one sport (football) while the number of respondent categories and the 335 usable questionnaires returned did not allow advanced statistical analysis of the data obtained. Practical implications The findings point to the need both for ethics and moral values to be installed in all the stakeholders through training and continuing education. It is also suggested that teams/clubs and related associations acting as regulators ought to implement governance principles and ethical programs, including whistleblowing lines and appoint integrity officers to minimize the match-fixing phenomenon. Furthermore, society, as well as government, sport regulators and sponsors, ought to encourage and demand fair play and integrity in sport through improved measures of governance and accountability and the implementation of ethical audits and public disclosure of audited financial statements of teams. Finally, sports integrity ought to be embedded in school curriculum from a very young age. Originality/value To the best of the authors’ knowledge, this is an original contribution to knowledge that has impact on the future of sporting fairness and social legitimacy

Testing the Impact of Group Offending on Behavioural Similarity in Serial Robbery

Behavioural case linkage assumes that offenders behave in a similar way across their crimes. However, group offending could impact on behavioural similarity. This study uses robbery data from two police forces to test this by comparing the behavioural similarity of pairs of lone offences (LL), pairs of group offences (GG) and pairs of offences where one crime was committed alone and the other in a group (GL). Behavioural similarity was measured using Jaccard’s coefficients. Kruskal–Wallis tests were used to examine differences between the three categories within the linked samples. No statistically significant differences were found for linked GG compared to linked LL pairs. However, differences emerged between GL and the other categories for some behaviours (especially control) suggesting caution should be applied when linking group and lone offences committed by the same perpetrator. Differences between linked and unlinked pairs were assessed using receiver operating characteristic. The results suggest it is possible to distinguish between linked and unlinked pairs based on behaviour especially within the GG and LL categories. There were, however, fewer significant findings for the GL sample, suggesting there may be issues linking crimes where the offender commits one crime as part of a group and the other alone

Is there a conjunction fallacy in legal probabilistic decision making?

Classical probability theory (CPT) has represented the rational standard for decision making in human cognition. Even though CPT has provided many descriptively excellent decision models, there have also been some empirical results persistently problematic for CPT accounts. The tension between the normative prescription of CPT and human behavior is particularly acute in cases where we have higher expectations for rational decisions. One such case concerns legal decision making from legal experts, such as attorneys and prosecutors and, more so, judges. In the present research we explore one of the most influential CPT decision fallacies, the conjunction fallacy (CF), in a legal decision making task, involving assessing evidence that the same suspect had committed two separate crimes. The information for the two crimes was presented consecutively. Each participant was asked to provide individual ratings for the two crimes in some cases and conjunctive probability rating for both crimes in other cases, after all information had been presented. Overall, 360 probability ratings for guilt were collected from 120 participants, comprised of 40 judges, 40 attorneys and prosecutors, and 40 individuals without legal education. Our results provide evidence for a double conjunction fallacy (in this case, a higher probability of committing both crimes than the probability of committing either crime individually), in the group of individuals without legal education. These results are discussed in terms of their applied implications and in relation to a recent framework for understanding such results, quantum probability theory (QPT)

Introduction and validation of the Juror Decision Scale (JDS): An empirical investigation of the Story Model

Purpose To develop and validate a self-report measure of individual juror decision making within criminal trials, based on theoretical features set out in the Story Model of juror decision making. Methods The Juror Decision Scale (JDS) and Acceptance of Modern Myths about Sexual Aggression (AMMSA) measure were completed by 324 jury-eligible participants split across 27 jury panels, after observing a rape trial re-enactment high in ecological validity. Dimensionality and construct validity of the JDS was investigated using traditional confirmatory factor analysis (CFA) techniques alongside confirmatory bifactor analysis at two time points (individual juror verdict decisions pre- and post-deliberation). Three competing models of the JDS were specified and tested using Mplus with maximum likelihood robust estimation. Results Bifactor model with three meaningful factors (complainant believability, defendant believability, decision confidence) was the best fit for the data at both decision points. Good composite reliability and differential predictive validity were observed for the three JDS subscales. Conclusion Alongside demonstrating its multidimensional conceptualisation, the JDS development permits future empirical testing of the Story Model theoretical assertions surrounding juror decision making. Present findings also provide early evidence of a certainty principle assessment process governing individual verdict decision formation. Theoretical and practical applications are discussed

Urban space and the social control of incivilities: perceptions of space influencing the regulationof anti-social behaviour

Contemporary cities are increasingly governed through space. In this article,we examine how urban space and perceptions thereof can influence the social control inthe area of incivilities. To this end, we first inspect the existing literature, in particularthe socio-spatial studies that emphasise the importance of culture and values in theinteraction with social control. Partly drawing on examples from our previous studies,we suggest that people’s perceptions of urban space (influenced by cultural symbols,social and media representations, aesthetics and other values) affect their perceptions ofincivilities, while the latter often determine or at least importantly contribute to theshaping of the social control of incivilities. We further highlight the role of gentrifica-tion as a medium and a tool of social control. The paper concludes by discussingimplications of this for the possible future, more integrated and interdisciplinaryresearch on the social control of incivilities in the city

Enhancing fraud prevention and detection by profiling fraud offenders

Aims: The paper first focuses on the crime of fraud and then on approaches to profiling offenders before examining closely studies of fraud offenders and their motivation. Method: Drawing on the existing empirical literature, a profile of the serious fraud offender is presented and critiqued together with a taxonomy of such offenders comprising 12 types. Conclusions: The implications of the findings for fraud detection and prevention are discussed

Enhancing fraud prevention and detection by profiling fraud offenders

Aims: The paper first focuses on the crime of fraud and then on approaches to profiling offenders before examining closely studies of fraud offenders and their motivation. Method: Drawing on the existing empirical literature, a profile of the serious fraud offender is presented and critiqued together with a taxonomy of such offenders comprising 12 types. Conclusions: The implications of the findings for fraud detection and prevention are discussed