A Buffer/Conduit Theory Relating Organizational Culture to Fraud.

• In Event: Fraud Detection and Auditor Judgement Decision Making

Abstract

Buffer/conduit theory is a proposed taxonomy consisting of three layers: organizational fraud orientation, a buffer/conduit layer, and individual fraud orientation. The middle layer contains organizational culture–related internal controls that buffer the orientation layers from spreading fraud-encouraging values, and serve as conduits transmitting fraud-deterring values—or, when controls do not function as intended, transmitting fraud-encouraging values. A factor analysis of 11 indicators of this three-layer taxonomy suggests that older generations of accounting practitioners apply it, but millennials do not. Experience appears to cause this generational difference, rather than unique millennial traits. We also discuss implications of our findings for internal control frameworks.

Authors

• Philip Beaulieu, University of Calgary

• Alan Reinstein, Wayne State University