Essays on The Causes of Accounting Fraud Essay

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The paper 'The Causes of Accounting Fraud ' is a great example of a Finance and Accounting Essay. Security has become a fundamental issue in today’ s banking industry. Over the years, different fraudulent transactions committed by third parties have occurred tremendously. As a result, fraud prevention is increasingly becoming a major concern for customers, banks, and individuals involved in public policy-making. Fraud is defined as the mechanism by which the fraudsters gain an unlawful financial advantage or cause unlawful loss through implicit or explicit deception. Since banking fraud can ultimately affect the quality of customer relationships as well as customer loyalty, effective communication of the importance of fraud prevention has become a central subject for academic research (Hoffmann & Birnbrich, 2012, p. 390). Corruption is considered a widespread phenomenon that affects all societies to varying degrees and at different times.

Due to their shared system of democracies, dictatorship, and increased corruption scandals, bribes have become so rampant in all countries despite their differences in income levels as well as law systems. However, recent scandals related to corruption have revealed that societies allegedly considered to be free-from-corruption are also affected by fraudulent activities.

It is notable that different countries are faced with large differences in regard to the level of corruption. Research shows that in some societies, there is no transaction completed without being affected by corruption and yet in other countries, corruption is exceptional and rarely tolerated (Pellegrini & Gerlagh, 2007). Definition of terms related to accounting Creative Accounting is the use of flexibility in accounting to effectively manage the measurement and presentation of account information to meet the needs or interests of prepares. Although creative accounting seems to be a common technique, it can be a costly approach to financial management.

Generally, businesses are under pressure to be seen profitable so as to attract more investors and resources. However, fraudulent accounting practices cause drastic consequences. Therefore, creative accounting increases income because it helps to recognize premature sales, while minimizes expenses by providing accounting capitalization of interests. Fraud involves going outside the regulatory framework with the intention of giving false information on the accounts. For example, the main methods used in fraudulent activities include fictitious transactions or misappropriation of assets by stealing cash and inventory.

However, it is important to note that creative accounting and fraud are related activities. Fair Presentation is applying flexibility in accounting to give an accurate and fair picture of the account information to meet the needs or interests of users. Impression Management is applying flexibility in the accounts particularly the use of narrative and graphs to provide a more favorable perception than it is justified of a company’ s results that serve the interests of preparers (Jones, 2011.p. 5-8). The causes of accounting fraud Taking into consideration the nature of and trends in today’ s retail banking fraud, it has been observed that customers depend more on the web for their various banking business.

While this has increased the number of people involved in online transactions, fraudsters are widely reacting to these changes based on how the Internet supports them to attack customers. Generally, the Internet enables the individuals involved in cybercrime to organize themselves as a network whereby they encourage one another in their fraudulent attack. Therefore, it is notable that fraudsters are more interested in unauthorized access to customer’ s online bank accounts.

It has become a common practice among fraudsters to steal access data through “ phishing. ” This is an approach where an email is sent from an allegedly authorized source to customers of a certain bank requesting his or her confidential information. Recently, phishing has become a major threat to online security because credit cards are the main payment instrument used for web-based transactions that have attracted the attention of different fraudsters (Hoffmann & Birnbrich, 2012, p. 392).



Hoffmann, O.A & Birnbrich, C. (2012). The impact of fraud prevention on bank-customer relationships: Research conducted in retail banking. International Journal of Bank Marketing. 30(5), 390-407. Emerald Group Publishing Limited.

Jones, M. (2011). Creative Accounting, Fraud and International Accounting Standards. University of Bristol.

Pellegrini, L & Gerlagh, R. (2007). Causes of corruption: The survey of cross-country analyses and extended results. Springer-Verlag.

Ross, A, Barton, C, Böhme, R, Clayton, R, van Eeten, G.J.M, Levi, M & Tyler, M. (2012). Measuring the Cost of Cybercrime. Retrieved January 28, 2014 from,

Transparency International (2004). Global corruption barometer. The Transparency International. Berlin.

Treisman, D. (2000). Causes of corruption: A cross-national study. Journal of Public Economics. 76(3), 399–457.

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