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Is There Sufficient Guidance to Detect, and Obtain a Conviction For, Occupational Fraud in Ireland?

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Is There Sufficient Guidance to Detect, and Obtain a Conviction For, Occupational Fraud in Ireland? Cork Institute of Technology SWORD - South West Open Research Deposit Masters Business 1-1-2014 Is There Sufficient Guidanceo t Detect, and Obtain a Conviction for, Occupational Fraud in Ireland? Carmel Buttimer Cork Institute of Technology Follow this and additional works at: https://sword.cit.ie/busmas Part of the Accounting Commons, Business Administration, Management, and Operations Commons, Business Law, Public Responsibility, and Ethics Commons, and the Taxation Commons Recommended Citation Buttimer, Carmel, "Is There Sufficient Guidanceo t Detect, and Obtain a Conviction for, Occupational Fraud in Ireland?" (2014). Masters [online]. Available at: https://sword.cit.ie/busmas/1 This Thesis is brought to you for free and open access by the Business at SWORD - South West Open Research Deposit. It has been accepted for inclusion in Masters by an authorized administrator of SWORD - South West Open Research Deposit. For more information, please contact [email protected]. Cork Institute of Technology School of Business Department of Accounting and Information Systems Is There Sufficient Guidance to Detect, and Obtain a Conviction for, Occupational Fraud in Ireland? This dissertation is submitted for the requirements of the Degree of Masters in Business (Research), Cork Institute of Technology by Carmel Buttimer FCA BBS November 2014 Research Supervisor – Sylvia Dempsey BComm FCA MSc (Accounting) Ethical Declaration The author hereby declares that, except where duly acknowledged, this thesis is entirely her own work and has not been submitted for any other degree in any third level institute. Carmel Buttimer (Student) Date Sylvia Dempsey (Supervisor) Date i Table of Contents Index of Figures ................................................................................................... v Index of Tables .................................................................................................... v Appendices .......................................................................................................... v Acknowledgements ................................................................................................ vi Abstract ................................................................................................................. vii Chapter 1 Introduction to this Research Study .................................................. 1 1.1 Introduction .............................................................................................. 1 1.2 Background to the Study .......................................................................... 1 1.3 Gaps in the Literature ............................................................................... 2 1.4 Research Objective ................................................................................... 5 1.5 Focus of this Research .............................................................................. 5 1.6 Limitation of this Research ...................................................................... 6 1.7 Structure of the Study ............................................................................... 7 1.8 Conclusion ................................................................................................ 8 Chapter 2 Definition of Fraud ............................................................................ 9 2.1 Introduction .............................................................................................. 9 2.2 Fraud is Not a New Crime ........................................................................ 9 2.3 Definition of Fraud ................................................................................. 10 2.3.1 Characteristics of Fraud .................................................................. 11 2.3.2 Activities that Constitutes Fraud ..................................................... 12 2.4 Impact of Fraud ...................................................................................... 13 2.5 Criminal Convictions for Fraud ............................................................. 15 2.6 Difficulty in Convicting for Fraud ......................................................... 16 2.6.1 Multifarious Definitions of Fraud ................................................... 17 2.6.2 Status of the Fraudster ..................................................................... 17 2.6.3 Difficulty in Detecting Fraud .......................................................... 19 2.6.4 Advances in Technology ................................................................. 20 2.6.5 Laws and Auditing Standards Not Keeping Pace ........................... 21 2.6.6 Organisations Not Pursuing Cases of Fraud ................................... 22 2.7 Controls to Prevent Fraud ....................................................................... 23 ii 2.8 ISA 240 “The Auditors Responsibilities Relating to Fraud in an Audit of Financial Statements .......................................................................................... 25 2.9 Conclusion .............................................................................................. 28 Chapter 3 Frameworks for Fraud Detection .................................................... 29 3.1 Introduction ............................................................................................ 29 3.2 Fraud Triangle (1950) ............................................................................ 29 3.2.1 Perceived Pressure .......................................................................... 33 3.2.2 Perceived Opportunity .................................................................... 37 3.2.3 Attitude/Rationalisation .................................................................. 40 3.3 Individuals Capabilities and Predatory Fraudsters ................................. 43 3.4 Subsequent Use of Fraud Triangle ......................................................... 44 3.5 Theory of Planned Behaviour (TPB) ...................................................... 45 3.6 Combined FT/TPB Framework .............................................................. 46 3.7 Conclusion .............................................................................................. 50 Chapter 4 Methodology ................................................................................... 51 4.1 Introduction ............................................................................................ 51 4.2 Research Definitions .............................................................................. 51 4.3 Research Objective ................................................................................. 52 4.4 Research Methodology ........................................................................... 54 4.4.1 Qualitative Research Techniques .................................................... 55 4.4.2 Quantitative Research Techniques .................................................. 56 4.5 Content Analysis .................................................................................... 57 4.6 Selection and Analysis of Data .............................................................. 59 4.7 Conclusion .............................................................................................. 66 Chapter 5 Relevance of the FT/TPB Framework ............................................ 67 5.1 Introduction ............................................................................................ 67 5.2 Types of Occupational Fraud ................................................................. 67 5.2.1 Fraudulent Financial Reporting (FFR) ............................................ 68 5.2.2 Asset Misappropriation (AM) ......................................................... 69 5.3 FT/TPB Framework ............................................................................... 73 5.4 Conclusion .............................................................................................. 83 Chapter 6 Adequacy of Auditing Standard in Ireland ..................................... 84 6.1 Introduction ............................................................................................ 84 6.2 FT/TPB framework to assess ISA 240 ................................................... 84 iii 6.3 “Incentive/pressure” in ISA 240 ............................................................. 89 6.4 “Opportunities” in ISA 240 .................................................................... 92 6.5 “Attitude/rationalisation” in ISA 240 ..................................................... 95 6.5.1 Attitude towards Fraud in ISA 240 ................................................. 96 6.5.2 Subjective Norms in ISA 240 ....................................................... 100 6.5.3 Perceived Behavioural Controls in ISA 240 ................................. 101 6.5.4 Moral Obligations in ISA 240 ....................................................... 102 6.6 Conclusion ............................................................................................ 103 Chapter 7 Conclusions of this Research ........................................................ 105 7.1 Introduction .......................................................................................... 105 7.2 Sufficiency of ISA 240 ......................................................................... 106 7.2.1 Additional Incentives/Pressures .................................................... 109 7.2.2 Opportunity ..................................................................................
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