Sei sulla pagina 1di 7


INTRODUCTION: The fraud scale model was originally developed as an

alternative to what is known as the fraud triangle model. The fraud scale
model places an emphasis on personal integrity rather than on
rationalization. This model was developed by W. Steve Albrecht, and is
especially applicable to financial reporting fraud.
2.3: Dr. Steve Albrecht, Keith Howe, and Marshall Romney – The Nine Motivators of fraud
and Alberchts’s Fraud Scale.
Dr. Steve Albrecht, Keith Howe, and Marshall Romney, studied frauds in corporate settings in
Deterring Fraud: The Internal Auditor‟s Perspective20. They classified nine motivators of
1. Living beyond means- this is where a person is trying to live way above their actual
standards, making them have to go beyond their way to get something.
2. Overwhelming desire for personal gain- this is where one has a great desire to fulfil
what they desire in life.
3. High personal debt- this may cause one stress on where they will get money and may
result one to commit fraud to get money.
4. Close association with customers- this maybe be a cause of temptation where you
know that you have personal informational and details on somebody and you can get easy
access to their funds.
5. Perception that pay was incommensurate with duties- this means one believes they
can‟t work if they are not getting a financial gain in form of salaries or wages, hence if
they are not paid or are paid little wages they may turn to fraud to justify this unjust
6. “Wheeler-dealer” attitude- this is the attitude of a „hustler‟ where one will go to
extreme ends to get something, including deceiving someone through fraud.
7. Feeling challenged to beat the system- systems have been put in place to handle issues
of finances, but some people may feel smart enough and try to hack these systems and
access money,
19 Edwin H. Sutherland & Donald R. Cressey, Criminology 51 (10th ed. 1978); Edwin H. Sutherland et al.,
Criminology 66 (11th ed. 1992) (emphasis added).
20 W. Steve Albrecht, Keith R. Howe, Marshall B. Romney, Deterring fraud: the internal auditor's perspective,
Institute of Internal Auditors Research Foundation, 1984
21 Id., p.111.
8. Excessive gambling habits-gambling process is a process that involves deceit in order
to get a financial gain or profit, which in itself is fraud and can create greed that results in
9. Undue family or peer pressure- family members or friend may entice one to participate
in fraudulent activities say maybe because of a financial need that one may have or to
2010 APIPA Conference
Contract & Procurement Fraud 1
July 21, 2010
prove a point to friends and colleagues.
It is important to note that evident from Albrecht‟s list, his motivators are very similar to the
“nonshareable” financial problems Cressey identified.
In many ways, the study by Albrecht et al. supported Cressey‟s model. Like Cressey‟s study, the
Albrecht study suggests there are three factors similar to those in Cressey‟s fraud triangle i.e
Opportunity, pressure or motive and Rationalization. To explain this idea, he formulated the
Fraud scale that ranked situational pressures, perceived opportunities, and personal integrity.
The scale explained that when situational pressures and perceived opportunities are high and
personal integrity is low, occupational fraud is much more likely to occur than when the opposite
is true.
Albrecht describes situational pressures as “The immediate problems individuals experience
within their environments,” usually high personal debts or financial losses. Opportunities to
commit fraud, Albrecht says, 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 person adopts.22

About the author:

W. Steve Albrecht is the Andersen Alumni Professor at the Marriott School of
Management of Brigham Young University (BYU). He is a former president of the American
Accounting Association and was previously president of the Association of Certified Fraud
2010 APIPA Conference
Contract & Procurement Fraud 2
July 21, 2010
Examiners. He was also formerly an associate dean of the Marriott School of Management. Albrecht
served as the mission president for The Church of Jesus Christ of Latter-day
Saints in Tokyo, Japan.[1]
Albrecht has a bachelor's degree from BYU and a Ph.D. in accounting and an M.B.A. from
the University of Wisconsin–Madison. He was a professor at the University of Illinois before he
joined the BYU faculty in 1977. He was also previously an employee of Deloitte & Touche.
Albrecht is a certified public accountant, a Certified Internal Auditor and a Certified Fraud Examiner.
From 1990 to 1998 Albrecht was the director of BYU's School of Accounting.
Albrecht was president of the Association of Certified Fraud Examiners from 1989 to 1992 and the
president of the American Accounting Association from 1997 to 1998.
Albrecht has served on the boards of directors of SkyWest Airlines, Cypress Semiconductor, Red
Hat, Inc., ICON Health & Fitness and Bonneville International.
Albrecht is married to the former LeAnn Christiansen. They are the parents six children.

As an auditor, are you going to hang out long enough with each top-level manager to
determine how they respond to a variety of situations so you can assess their ability
to operate with integrity over time? The time involved for the auditor would be huge
and the intrusiveness even larger. That’s necessary in the fraud scale model.

Dr. Steve Albrecht—The Fraud Scale  Top 3 factors from personal characteristic list: • Living beyond
their means • Overwhelming desire for gain • High personal debt  Risk factor: Too much trust in key
employees  Fraud most likely to occur when: • Situational Pressure is High • Personal Integrity is Low •
Perceived Opportunity is High

Who developed the fraud scale?

fraud scale
1. situational pressures
2. opportunities to commit
3. personal integrity
Albrecht's 9 motivators of fraud
1. living beyond means
2. overwhelming desire for personal gain
3. high personal debt
4. close association with customers
5. pay not commensurate with job
6. wheeler-dealer
2010 APIPA Conference
Contract & Procurement Fraud 3
July 21, 2010
7. strong challenge to beat the system
8. excessive gambling
9. family/peer pressure


Situational pressures that contribute to 2. Publishing of overly optimistic

management fraud earnings forecasts.

External economic conditions that can lead

Company financial pressures that can lead to fraud are:
to fraud are:
1. Unfavorable economic conditions
1. Heavy investments or losses. within an industry.
2. Insufficient working capital. 2. Difficulty in collecting receivables.
3. Unusually high debt. 3. Unusually heavy competition.
4. Reduced ability to acquire credit 4. Significant reduction in sales
5. Profit squeeze. backlog.
6. Restrictive loan agreements. 5. Pressure to merge.
7. Progressive deterioration in quality 6. Sizeable inventory increase without
of earnings. a comparable sales increase.
8. Urgent need for favorable earnings.
9. Need to gloss over temporarily bad
situations. Legal difficulties that can lead to fraud are:
10. Unmarketable collateral.
1. Significant tax adjustments.
2. Significant litigation, especially
Company limitations that can lead to fraud between stockholders and
are: management.
3. Suspension or delisting from a stock
1. Dependence upon only one or two
Opportunities that allow or encourage
2. Dependence upon only one or two
management fraud
3. Excess capacity.
4. Severe obsolescence.
5. Extremely long cycle. Relationships with outside parties that
6. Existence of revocable or imperiled make fraud easier to commit are:
1. Related-party transactions.
2. Use of several different auditing
Business decisions that can lead to fraud firms or the frequent changing of
are: auditors.
3. Reluctance to give auditors needed
1. Extremely rapid expansion.

2010 APIPA Conference

Contract & Procurement Fraud 4
July 21, 2010
4. Use of several different legal firms
or the frequent changing of legal
5. Use of a large number of banks.
6. Continuous problems with
regulatory agencies.

Organizational structures that make fraud

easier to commit are:

1. Complex business structures. Personal characteristics that can lead to

2. Ineffective or nonexistent internal fraud
auditing staff.
3. High level of computerization in a
firm. Personal and psychological characteristics
4. Inadequate internal controls. that suggest a high probability of fraud are:
5. Rapid turnover of key employees.
1. Low moral character.
2. Rationalization of contradictory
An economic environment that makes fraud behavior.
easier to commit is: 3. A lack of a strong code of ethics.
4. Wheeler-dealing.
1. An atypical or "hot" industry. 5. A lack of stability (associated with
promotional stagnation, career
Accounting practices that make fraud easier plateauing, aging, or domestic
to commit are: incompatibility).
6. A strong desire to beat the system.
1. Large year-end or unusual
2. Unduly liberal accounting practices. Demographic characteristics that suggest a
3. Poor accounting records. high probability of fraud are:
4. Inadequate staffing in the 1. Criminal or questionable
accounting department. background.
5. Inadequate disclosure of 2. Poor credit rating or financial
questionable or unusual accounting status.

Personal situational pressures that can

lead to fraud

Personal financial factors that can lead to

fraud are:

1. High personal debts.

2. Significant personal losses.
3. Inadequate income.

2010 APIPA Conference

Contract & Procurement Fraud 5
July 21, 2010
4. Living beyond one's means. 4. Absence of periodic rotations or
5. Illness. transfers of employees.
5. Inadequate personnel screening
policies for hiring new employees.
Personal habits that can lead to fraud are: 6. Absence of explicit and uniform
1. Extensive stock market or other personnel policies.
types of speculation. 7. Failure to maintain accurate
2. Extensive gambling. personnel records for disciplinary
3. Illicit sexual involvement. actions.
4. Heavy use of alcohol or drugs. 8. Failure to require executive
5. Routine borrowing. disclosures.
9. Dishonest or unethical
Personal feelings that can lead to fraud are: 10. Dominant top management.
11. Constantly operating under crisis
1. Extreme community or social conditions.
expectations to succeed. 12. Paying little attention to details.
2. Perception of being treated unfairly 13. Impersonal relationships or poor
or inadequately by organization. morale.
3. Resentment of superiors. 14. Lack of internal security.
4. Frustration with the job. 15. Too much trust is placed in key
5. Peer-group pressures within the employees.
company. 16. Tenure on key jobs becomes too
6. Personal/family expectations that long.
cannot be met. 17. Books and records are sloppy.
7. Insatiable desire for self-
enrichment or personal gain.

Opportunities that can lead to fraud

Personally-created opportunities that can

make fraud easier are:

1. Familiarity with operations

(including cover-up capabilities).
2. Close association with suppliers and
other key people.

Firm characteristics that make it easier for

an individual to commit fraud are:

1. Failure to inform employees about

rules and disciplines of fraud
2. Rapid turnover of key employees.
3. Absence of mandatory vacations.
2010 APIPA Conference
Contract & Procurement Fraud 6
July 21, 2010

The fraud shows the relationship between pressures,opportunities and integrity. With fraud,the
greater the perceived opportunity or the more intense the pressure,the less rationalization it take to
motivate someone to commit fraud. This shows that the more dishonest a perpetrator is,the less
opportunity or/and pressure it takes to motivate fraud.

The types of pressure are financial that include greed,poorcredit,high bills or personal debt,personal
financial losses, and unexpected financial needs. Vce pressures that include gambling, drugs,alcohol.
Work related pressures such as recgniton for job performance,feeling of job dissatisfaction,fear of
losing one’s job and promotion etc.

Albretech believed that ‘when situational pressures and perceived opportunities are high and
personal integrity is low,occupational fraud is much more likely to occur than when the opposite”

2010 APIPA Conference

Contract & Procurement Fraud 7
July 21, 2010