The Fraud Scale
Opportunities To Commit
Source: Albrecht, Howe, and Romney, Deterring Fraud: The Internal Auditor’s Perspective, p. 6 (Altamonte Springs: The Insti- tute of Internal Auditors Research Foundation, 1983.)
The authors describe situational pressures as “the immediate problems individuals experience within their environments, the most overwhelming of which are probably high personal debts or financial losses.”32 Opportunities to commit fraud, Albrecht et al. say, may be created by deficient or missing internal controls—those of the employee or the company. Personal integrity “refers to the personal code of ethical behavior each per- son adopts. While this factor appears to be a straightforward determination of whether the person is honest or dishonest, moral development research indicates that the issue is more complex.”33
Albrecht and his colleagues believed that, taken as a group, occupational fraud per- petrators are hard to profile and that fraud is difficult to predict. His research examined comprehensive data sources to assemble a complete list of pressure, opportunity, and in- tegrity variables, resulting in a list of 82 possible red flags or indicators of occupational fraud and abuse. The red flags ranged from unusually high personal debts, to belief that one’s job is in jeopardy; from no separation of asset custodial procedures, to not ade- quately checking the potential employee’s background.34
Although such red flags may be present in many occupational fraud cases, Albrecht and associates caution that the perpetrators are hard to profile and fraud is difficult to predict. To underscore this point, their research does not address—and no current re- search has been done to determine—if nonoffenders have many of the same characteris- tics. If so, then the list may not be discriminating enough to be useful. In short, while potential red flags should be noted, they should not receive undue attention absent more compelling circumstances.