Broadening the Fraud Triangle: Instrumental Climate and Fraud

ABSTRACT We survey a unique respondent group of fraud perpetrators, auditors who investigated fraud, and employees who witnessed fraud within organizations, to identify whether, and how, an instrumental organizational climate is associated with fraud. We define an instrumental climate as one in which employees make decisions in their own or the organization's best interests to the exclusion of ethical concerns. We find that 39 percent of respondents agreed or strongly agreed that an instrumental climate was present when fraud was perpetrated. This climate is associated with particular elements of the fraud triangle including motives such as a malevolent work environment and social incentives and pressures, as well as rationalizations that are primarily oriented toward others. One specific rationalization—helping the company—draws attention to the phenomenon of unethical pro-organizational behavior. Our results suggest that fraud has an important social dimension that is largely neglected by current fraud triangle interpretations.