A tale of two triangles: comparing the Fraud Triangle with criminology’s Crime Triangle

Abstract

Purpose – This paper aims to propose the application of the Crime Triangle of Routine Activity Theory to fraud events as a complement to the universally accepted Fraud Triangle. Design/methodology/approach – The application of the Crime Triangle is illustrated using scenarios of asset misappropriations by type of perpetrator: external perpetrator, employee, management and the board and its governing bodies. Findings – The Crime Triangle complements the Fraud Triangle’s perpetrator-centric focus by examining the environment where fraud occurs and the relevant parties that play their role in preventing fraud or not playing their role, and thus, allowing the occurrence of fraud. Applying both triangles to a fraud event provides a comprehensive view of the fraud event. Research limitations/implications – The scenarios are limited to asset misappropriations with one perpetrator. Future research can apply both triangles to different types of fraud and cases where perpetrators collude to commit fraud. Practical implications – This paper maps the Crime Triangle to the Fraud Triangle to provide forensic accounting practitioners and researchers with a comprehensive perspective of a fraud event. This comprehensive perspective of fraud is the starting point to designing fraud risk management strategies that address both the perpetrator and the environment where the fraud event occurs. Originality/value – This paper is the first to propose the application of the established Crime Triangle environmental criminology theory as a complement to the Fraud Triangle to obtain a comprehensive perspective of a fraud event.