Crude Theory And Corporate Fraud Risk Factor Theory

IV. Fraud triangle and fraud diamond

Causes on business fraud, theorists proposed many famous theory about corporate fraud，fraud triangle theory, GONE theory and corporate fraud risk factor theory. US Association of Certified Fraud Examiners (ACFE), the current president of the American Accounting Association W. Steve Albrecht proposed the fraud theory (Wells 2001), he believes that corporate fraud is generated by the pressure, opportunity and Rationalization three factors, the lack of any of the above factors can not really result corporate fraud. Pressure may be financial difficulties or urgent demand for capital operations. Opportunities may be loose or lax controls and information asymmetry. The rationalization might be "I just borrow

True to form corporate fraud There is one final factor rationalization, namely corporate fraud must find a reason, so that enterprises engaged in corrupt conduct its own moral values, codes of conduct is consistent, regardless of the explanation itself is really reasonable. Corporate fraud are common reasons are: This is the company owes me, I just temporarily borrow money, and will definitely return, my goal is well intentioned, the use is justified, etc. The real reasons are: 1) The fraudsters think the fraud can protect a loved person in a justified way. 2) The fraudsters think if they do not committee fraud, they will lose something such as family, house, vehicle, etc. 3) The fraudsters think that it is impossible to help them from outside. 4) The fraudsters think their act as borrowing because they plan to pay the money the stole back in some date of future. 5) The fraudsters may be thinking that something is belonging to them because not satisfied with salaries, job environment, and treatment by managers. 6) The fraudsters are cannot able to understand or does not care about the result of their activities or of accepted concepts of decency and trust.

Fraud happens need three elements occurs at the same time. As long as the effective control of any element in fraud triangle, it is possible to prevent fraud in the first

Management by one person is the main reason of rationalization. He or she think that they own the company, so they can do whatever they want. When the company is not listed, this idea is understandable. But once the company is listed, and after the company offering stocks and bonds the company is no longer only owned by individual, but also owned by other investors. And while the company making decisions, the interests of all shareholders must be considered.

(3) Considering from opportunity element, the supervision of information disclosure should be improved. For the listed companies, information disclosure is particularly important. SFC has published a series of principles about disclosure rules to ensure effective of disclosure, and the principle is still developing. But how to improve these principles, and made these rules become a completely system, and made the listed companies pay attention to the substance of the information disclosure rather than the form of the information of disclosure, is worth more