:: Volume 4, Issue 8 (2-2020) ::
aapc 2020, 4(8): 339-369 Back to browse issues page
A Comparison of Triangle, Diamond and Pentagon Fraud Models in Fraud Risk Assessment
Masoud Taheri
Ph.D. in Accounting, Faculty of Administrative Sciences and Economics, University of Isfahan (Corresponding Author) , masoudtaheri99@yahoo.com
Abstract:   (7875 Views)
Fraud risk assessment is one of the most important processes that auditors do in their investigations. Hence, they should try to use appropriate models in assessing Fraud risk. In this regard, this study compares triangle, diamond and pentagon models of fraud in fraud risk assessment. Fraud triangle model introduces pressure/ motivation, opportunity and justification as dimensions of fraud. However, the fraud diamond model, in addition to the three dimensions mentioned above, considers the capability dimension to assess fraud risk. The fraud pentagon model, in addition to the four dimensions, also considers the arrogance dimension as one of the dimensions of fraud. In order to compare these models, an experimental case has been used. Analysis of variance, Tukey and Scheffe tests were used to test the research hypotheses. The statistical population of the research is the certified public accountants working in the audit organization and audit firms in year 2018 which were 1462 auditors in total. Cochran formula was used to calculate the size of sample. According to the statistical population, stratified sampling method was used. The statistical sample consisted of 252 auditors. The results show that the difference of fraud risk assessment among three models is significant. Since this study was conducted with respect to Iran's environment, it can be said that the use of the pentagon fraud model can result to a more appropriate assessment of fraud risk. Therefore, it is recommended that auditors conduct fraud risk assessment using the pentagon fraud model
Keywords: Fraud Diamond Model, Fraud Pentagon Model, Fraud Risk Assessment, Fraud Triangle Model
Full-Text [PDF 285 kb]   (1229 Downloads)    
Type of Study: Research | Subject: Special
Received: 2019/08/3 | Accepted: 2019/08/25 | Published: 2020/02/8
References
1. Abdel-Khalik, A. (2002). Reforming Corporate Governance Post Enron: Shareholder’s Board of Trustees and the Auditor. Journal of Accounting and Public Policy, 21 (2): 97–103.
2. Apostolou, B., Hassell, J., and Webber, S. (2001). The Relative Importance of Management Fraud Risk Factors. Behavioral Research in Accounting, 13: 1–24.
3. Aprilian, S., and Agustina, L. (2017). The Analysis of Fraudulent Financial Reporting Determinant through Fraud Pentagon Approach. Jurnal Dinamika Akuntansi, 2 (9): 154-165.
4. Arel, B., Jennings, M., Pany, K., and Reckers, P. (2012). Auditor Liability: A Comparison of Judge and Juror Verdicts. Journal of Accounting and Public Policy, 31 (5): 516–532.
5. Australian Auditing Standards (AUS). (2004). ASA 240.
6. Beasley, M.S., Carcello, J.V., Hermanson, D.R., and Neal, T. (2010). Fraudulent Financial Reporting: 1998–2007, An Analysis of U.S. Public Companies. Committee of Sponsoring Organizations of the Treadway Commission, Durham, NC.
7. Bell, T.B., and Carcello, J.V. (2000). A Decision Aid for Assessing the Likelihood of Fraudulent Financial Reporting. Auditing: A Journal of Practice & Theory, 19 (1): 169–184.
8. Binti, N., and Hesri, F. M. D. (2010). Fraud Diamond Risk Indicator: An Assessment of Its Importance and Usage. International Conference on Science and Social Research (CSSR), December 5 - 7, Malaysia.
9. Bonner, S., Libby, R., and Nelson, M. (1996). Using Decision Aids to Improve Auditors’ Conditional Probability Judgments. Accounting Review, 71 (2): 221–240.
10. Carcello, J.V., and Hermanson, D.R. (2008). Fraudulent Financial Reporting: How Do We Close the Knowledge Gap? Institute for Fraud Prevention, Morgantown, WV.
11. Carpenter, T. (2007). Audit Team Brainstorming, Fraud Risk Identification, and Fraud Risk Assessment: Implications of SAS No. 99. Accounting Review, 82 (5): 1119–1140.
12. Crowe Horwath. (2011). Playing Offense in a High-Risk Environment. Crowe Horwath, New York, NY.
13. Dorminey, J., Fleming, A., Kranacher, M., and Riley Jr. R. (2012). Beyond the Fraud Triangle: Enhancing Deterrence of Economic Crimes. Fraud Magazine (September/October), 18–25.
14. Douglas M. B., F. Todd DeZoort, Dana R. Hermanson. (2015). The Effect of Alternative Fraud Model Use on Auditors’ Fraud Risk Judgments. Journal of Accounting and Public Policy, 34: 578–596.
15. Dowling, C., and Leech, S. (2007). Audit Support Systems and Decision Aids: Current Practice and Opportunities for Future Research. International Journal of Accounting Information Systems, 8: 92–116.
16. Feng, M., Ge, W., Luo, S., and Shevlin, T. (2011). Why Do CFOs Become Involved in Material Accounting Manipulations? Journal of Accounting and Economics, 51 (1/2): 21–36.
17. Field, Andy. (2009). Discovering Statistics Using SPSS. Third Edition, SAGE Publications Ltd.
18. Fortvingler, Judit. (2016). Different Approaches to Fraud Risk Assessment and Their Implications on Audit Planning. Periodica Polytechnica Social and Management Sciences, 24(2): 102-112.
19. Hammersley, J. S. (2011). A Review and Model of Auditor Judgments in Fraud-Related Planning Tasks. Auditing: A Journal of Practice & Theory, 30 (4): 101–128.
20. Hammersley, J.S., Johnstone, K.M., and Kadous, K. (2011). How Do Audit Seniors Respond to Heightened Fraud Risk. Auditing: A Journal of Practice & Theory, 30 (3), 81–101.
21. Hogan, C.E., Rezaee, Z., Riley Jr., R., and Velury, U.K. (2008). Financial Statement Fraud: Insights from the Academic Literature. Auditing: A Journal of Practice & Theory, 27 (2): 231–252.
22. Johnson, E., Kuhn Jr., J., Apostolou, B., and Hassell, J. (2013). Auditor Perceptions of Client Narcissism as a Fraud Attitude Risk Factor. Auditing: A Journal of Practice & Theory, 32 (1): 203–219.
23. Kassem, R., and Higson, A. (2012). The New Fraud Triangle Model. Journal of Emerging Trends in Economics and Management Sciences, 3 (3): 191–195.
24. Mackevicius, J. and Giriunas, L. (2013). Transformational Research of the Fraud Triangle. EKONOMIKA, 92(4): 150-163.
25. Marchesi, M. Favere. (2013). Effects of Decomposition and Categorization on Fraud-Risk Assessments. Auditing: A Journal of Practice & Theory, 32 (4): 201–219.
26. Mark, J. (2011). Why the Fraud Triangle is No Longer Enough. Crowe Horwath.
27. McEnroe, J. E., and Martens, S. C. (2001). Auditors’ and Investors’ Perceptions of the ‘‘Expectation Gap’’. Accounting Horizons, 15 (4): 345–358.
28. Montgomery . C.D. (2007). Design and Analysis of Experiments. John Wiley & Sons.
29. Nelson, M. (2009). A Model and Literature Review of Professional Skepticism in Auditing. Auditing: A Journal of Practice & Theory, 28 (2): 1–34.
30. Nelson, M., and Tan, H. (2005). Judgment and Decision-Making Research in Auditing: A Task, Person, and Interpersonal Interaction Perspective. Auditing: A Journal of Practice & Theory, 24: 41–71.
31. Ping, Z. (2007). The Impact of the Public’s Expectations of Auditors on Audit Quality and Auditing Standards Compliance. Contemporary Accounting Research, 24 (2): 631–654.
32. Rahman, F., Achyani, F. and Zulfikar. (2017). Fraud Pentagon dalam Mendeteksi Financial Statement Fraud.
33. Rezaee, Z. (2005). Causes, Consequences, and Deterrence of Financial Statement Fraud. Critical Perspectives on Accounting, 16: 277–298.
34. Rukmana, H. S. (2018). Pentagon Fraud Affect on Financial Statement Fraud and Firm Value Evidence in Indonesia. South East Asia Journal of Contemporary Business, Economics and Law, 16 (5): 118-122.
35. Trompeter, G., Carpenter, T., Desai, N., Jones, K., and Riley Jr., R. (2013). A Synthesis of Fraud Related Research. Auditing: A Journal of Practice & Theory, 32 (1): 287–321.
36. Wilks, J., Zimbelman, M. (2004). Decomposition of Fraud-Risk Assessments and Auditors’ Sensitivity to Fraud Cues. Contemporary Accounting Research, 21 (3): 719–745.
37. Wolfe, D., and Hermanson, D. R. (2004). The Fraud Diamond: Considering Four Elements of Fraud. CPA Journal: 38–42.
38. Zaki, N. M. (2017). The Appropriateness of Fraud Triangle and Diamond Models in Assessing the Likelihood of Fraudulent Financial Statements- an Empirical Study on Firms Listed in the Egyptian Stock Exchange. International Journal of Social Science and Economic Research, 2: 2403-2433.



XML   Persian Abstract   Print



Rights and permissions
Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Volume 4, Issue 8 (2-2020) Back to browse issues page