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Fraud detection using fraud triangle risk factors

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Abstract

The objective of this study is to identify the financial statement fraud factors and rank the relative importance. First, this study reviews the previous studies to identify the possible fraud indicators. Expert questionnaires are distributed next. After questionnaires are collected, Lawshe’s approach is employed to eliminate these factors whose CVR (content validity ratio) values do not meet the criteria. Further, the remaining 32 factors are reviewed by experts to be the measurements suitable for the assessment of fraud detection. The Analytic Hierarchy Process (AHP) is utilized to determine the relative weights of the individual items. The result of AHP shows that the most important dimension is Pressure/Incentive and the least one is Attitude/rationalization. In addition, the top five important measurements are “Poor performance”, “The need for external financing”, “Financial distress”, “Insufficient board oversight”, and “Competition or market saturation”. The result provides a significant advantage to auditors and managers in enhancing the efficiency of fraud detection and critical evaluation.

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Authors and Affiliations

  1. Department of Accounting and Information Technology, Advanced Institute of Manufacturing with High-tech Innovations, National Chung Cheng University, 168 University Rd., Min-Hsiung, Chia-Yi, Taiwan, 62102

    Shaio Yan Huang

  2. Department of Accounting Information, National Taipei University of Business, 1, Sec. 3, Zhongxiao E. Rd., Taipei, 106, Taiwan

    Chi-Chen Lin

  3. Department of International Trade, Feng Chia University, 100, Wenhwa Rd., Taichung, 407, Taiwan

    An-An Chiu

  4. School of Economics and Business, SUNY College at Oneonta, 226 Netzer Administration Bldg., Oneonta, NY, 13820, USA

    David C. Yen

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  1. Shaio Yan Huang
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  2. Chi-Chen Lin
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  3. An-An Chiu
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  4. David C. Yen
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Correspondence to David C. Yen.

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Huang, S.Y., Lin, CC., Chiu, AA. et al. Fraud detection using fraud triangle risk factors. Inf Syst Front 19, 1343–1356 (2017). https://doi.org/10.1007/s10796-016-9647-9

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