In recent years the role of the external auditors in relation to the detection of fraud has come under scrutiny. In an effort to give guidance, the auditing standard setters have employed the “fraud triangle” (which originated from Cressey’s work ) setting out pressures, opportunity and rationalisation behind frauds. Traditionally, it could be said that external auditors have focused on opportunity (i.e. through the assessment of internal controls). Since the mid - 1990s auditors have looked at high level risks and so have been considering pressures on management. However, the third aspect of the fraud triangle, namely rationalisation, seems to have been ignored. The point is that two people may experience the same pressures and have the same opportunity to commit a fraud, but depending on how they rationalise the situation, one may commit it whilst the other may not. The under appreciation of this aspect of the fraud triangle may mean there is a weakness in the external auditors’ approach.
|Title of host publication||Proceedings of the 36th Annual Congress of the European Accounting Association|
|Place of Publication||Paris, France|
|Publisher||European Accounting Association|
|Number of pages||20|
|Publication status||Published - 2 May 2013|
- External auditors
- financial statements fraud
- management's motivations
- financial reporting fraud
- accounting manipulations
- fraud triangle
Higson, A., & Kassem, R. (2013). Implications of the fraud triangle for external auditors. In Proceedings of the 36th Annual Congress of the European Accounting Association European Accounting Association.