Why do accountants still commit fraud? As a business ethics keynote speaker, business ethics consultant and book author, I am often asked with more updated reporting (since the days of Enron) and the increased teaching of ethics (usually CPE credits) in refreshers, why accountants are still committing fraud?
As 2022 approaches 2023, it has been estimated that there has been more than $6 billion in accounting fraud from PPP to insider bank fraud.
Just because an individual has sat through countless hours of coursework, study and review, and on top of that has read case studies of fraud and, more so, has even listened to presentations on the topic, is no guarantee the accountant will not commit a crime.
Why do accountants still commit fraud?
As a business ethics keynote speaker, business ethics consultant and book author, I suppose there is truth in the most flippant answer of all: because accountants are human. However, the statement is inherently unfair. The majority of accountants, financial analysts, budget directors and CFOs for that matter, are quite ethical. It is a source of their pride and reputation.
What is the difference? Why do some have stellar careers, and other accountants fall off the rails? It turns out that several factors can be identified that may just help answer the question.
- Temptation (borne of indifference?) – Some call the first of these factors “temptation,” or a lack of oversite, but I most often refer to it as opportunity; the opportunity to be put in front of money or power or prestige or all three. Sometimes the accountants most tempted to commit fraud are those who have been “office fixtures,” there for decades, or those who don’t have a defined reporting structure or whose working is taken for granted. No matter which scenario, what is clear is that there are no controls over the accountant’s work; it is merely taken for granted. Who is responsible for this? Most often upper management; to their eyes, the accountant is invisible and this, of course leads to lax policies. The fraudster sees this and exploits it.
- Need – What is the need the accountant may have to commit fraud? Sometimes it may spring out of money problems or other times it may spring from anger or jealousy or feeling unappreciated or simply from boredom. True, the accountant may also do what they do out of a feeling of pressure, or “having to please the boss,” or loyalty or to meet the expectations of a stock analyst or shareholders. The end result is a manipulation of numbers and a form of theft.
- Justification for my actions – This might also be called a rationalization or any form of reasoning. Rationalization morphs into many emotions and explanations. Sometimes the reasons for justifying unethical actions are never known, sometimes they are obvious.
Why do accountants still commit fraud? The reasons are numerous, but invariably the activity springs from the three factors I just listed. The issue isn’t the “why,” but the how. How can fraud be prevented?
There must be oversite to understand the dynamic of employees who are “tempted,” and/or the reasons why management is indifferent. The need, similarly must be addressed, especially if there is pressure on the accounting staff to meet numbers. No accountant should feel pressured, ever; not out of loyalty or shareholder expectations or any other reasons.
There is no justification for fraud however, unless an ethical core runs through the company, the motivation to commit fraud will always be there.
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