Accountants’ Perceptions of the Relationship Between Organizational Culture and Fraud Risk

• In Event: Continental Breakfast and Research & Education Forum
  In Paper Session: Table 19: Fraud Risk and Internal Contols

Abstract

Organizational culture (OC) helps to prevent and report financial fraud. Extensive guidance exists on control functions of OC in this regard (e.g., COSO 2013). We investigate whether accounting practitioners in general concur with guidance, as well as related research in accounting and other disciplines. We are the first study to examine the views of accountants regarding their experiences with OC in a more general business context. The views of our sampled 137 accountants in general were consistent with guidance and relevant research, and do not suggest any obvious limitations of OC as a control against fraud. Unexpectedly, the results were consistent across various demographic groups, including age, gender, and experience.
A different conclusion emerges from our regression analysis, where accountants’ perceptions of how OC affects fraud was the dependent variable and ratings of the ten other OC characteristics were the independent variables. Variables involving ethical values themselves had significant coefficients, but most concerning organizational procedures did not, and again the results were consistent across demographic groups. We thus conclude that practitioners learn early in their careers, and continue to believe, that ethical values dominate “soft” organizational controls. This is a concern for COSO and other control frameworks that emphasize the role of culture-oriented controls in preventing and detecting fraud.
We also found that older accountants believed more strongly than Millennials that the latter are more likely than themselves to commit fraud. However the generations did not differ on how Millennials’ values may contribute to fraud.

Authors

• Philip Beaulieu, University of Calgary

• Alan Reinstein, Wayne Stsate University