The Roles of Collusion, Organisational Orientation, Justice Avoidance, and Rationalisation on Commission of Fraud : A Model Based Test

Several previous studies have pointed out the need for the use of a more robust statistical methodology in order to gain a better understanding of all forms of fraud. In this paper, we studied the aetiology of fraud proposed by Cressey (1973) by examining two models that incorporated rationalisation into causal relationships within a fraud commission model and hence of a fraud risk model. A sample of 122 Indonesian respondents, who had ever encountered any forms of fraud, was used to test two theory based structural equations models. Because of the poor fit of the two theoretical models to the data as shown by the SRMR index and because the path between rationalisation and commission of fraud was found to be non-significant, an exploratory research process was used to derive a further model. The outcome of this process was the introduction of additional paths into the second theoretical model. This model was tested using another sample of 122 respondents and produced a good fit to the data. Significant direct and indirect drivers of commission of fraud were identified and these extended the theory and introduced the consideration of a wider range of fraud risk factors for the global audit profession. Collusion was perceived to be the strongest direct influence on commission of fraud with a lesser effect arising from opportunity for fraud and a final direct influence arising from the avoidance of justice. In addition, organisational orientation was perceived to provide another indirect influence on the commission of fraud. The paper concludes with a discussion of the implications of these findings