The Cressey hypothesis (1953) and an investigation into the occurrence of corporate fraud: an empirical analysis conducted in Brazilian banking institutions

Abstract

ABSTRACTis article lls a technical-scienti c gap that currently exists in the Brazilian literature on corporative fraud, by combining the theoretical framework of agency theory, of criminology, and of the economics of crime. In addition, it focuses on a sector that is usually excluded from analyses due to its speci c characteristics and shows the application of multinomial logit panel data regression with random e ects, which is rarely used in studies in the area of accounting. e aim of this study is to investigate the occurrence of corporative fraud, as well as cases of fraud in Brazilian banking institutions, by using detection variables related to the Cressey fraud triangle. Research into fraud and methods of detecting fraud has grown in management literature, especially a er the occurrence of various corporative scandals in the 1990s. Although regulatory agencies have increased their investments in monitoring and control, fraud investigations and convictions are still common in the day-to-day administration of banks, as can be seen in the Brazilian Central Bank and the National Financial System Resource Council's databases of punitive proceedings. We believe that this article will have a positive impact in the area of accounting sciences, since it involves corporative fraud in a multidisciplinary form and because it provides the incentive to use a quantitative tool that can help increase the development of similar studies in the area. is study tested the theory that the dimensions of the fraud triangle condition the occurrence of corporative fraud in Brazilian banking institutions. irtytwo representative variables of corporative fraud were identi ed in the theoretical-empirical review, which were reduced to seven latent variables by the principal component analysis. Finally, the seven factors formed the independent variables in the multinomial logit models used in the hypothesis tests, which presented promising results.

Research Topics in Accounting Fraud in the 21st Century: A State of the Art

“…On the other hand, the Fraud Triangle and its three interactive elements (pressure, opportunity and rationalization) are common to all frauds [47,48], and those related to accounting are not an exception. Despite its importance, different authors do not agree on which of its three elements is most important.…”

“…Machado and Gartner, 2017 [47] The theoretical framework of the theory of the agency, of criminology and of the economy of crime is combined with the Fraud Triangle to study the occurrence of corporate fraud in Brazilian banking institutions.…”

“…The relationship between fraud in companies and the rotation of their managers is an obvious and contrasted fact [19,47,120]. Thus, in the work of Persons [57], which was carried out on 224 fraudulent companies judicially sued in the United States, it was highlighted that, in general, there is a greater turnover of executives in said companies, with their compensation being less.…”

Academic Cheating and Characteristics of Accounting Students

“…Fraud Triangle was first introduced by Donald R. Cressey, who said that three things that encourage fraud behavior, namely pressure, opportunity, and rationalization (Machado and Gartner, 2018). The following picture is the fraud triangle: 2018Pressure, also known as incentive or motivation, refers to something that happens in the personal life of a fraudster (a fraudster) that creates a need that motivates a fraudster to commit fraud (Singleton & Singleton, 2010;Wolfe and Hermanson, 2004).…”

“…The following picture is the fraud triangle: 2018Pressure, also known as incentive or motivation, refers to something that happens in the personal life of a fraudster (a fraudster) that creates a need that motivates a fraudster to commit fraud (Singleton & Singleton, 2010;Wolfe and Hermanson, 2004). Conditions related to immorality, emergencies, increased needs, reversals in the business environment and a high standard of living standards are the main factors for fraud (Machado and Gartner, 2018;Schuchter and Levi, 2013). The greater the incentive or pressure, the more likely a person will be able to rationalize fraud (AICPA, 2002).…”