The use of personality traits to predict propensity to commit fraud

On Thursday, 03/31/2016, law graduate study program Law for Management held a lecture from visiting lecturer prof. dr. Lori Kopp from the Faculty of Management, University of Lethbridge, Alberta, Canada.

ACFE (Association of Certified Fraud Examiners) had published data from their study of global deception, which showes that companies have at least 5% of the revenue losses due to fraud. The lecturer presented which personality traits have influence on fraud in the companies and on the financial statements. She pointed out three conditions that affect a person to commit a fraud. Connecting them to the so-called "Fraud triangle", comprising a perceived opportunity, the execution of the pressure and the ability to justify the deceit. They conducted a study in which they tried to answer the following questions: Which personality traits affect the individual to commit a fraud and what individual's characteristics refer a person to commit fraud. They had studied how much likely would individuals with personal characteristics, such as honesty, machiavellianizem, narcissism and conscientiousness, commit a fraud. They conducted an experiment, which involved the students in the role of managers in the production of reports for the company. They were set up in different situations, where they were given the possibility for fraud. The survey showed that personal carasteristics that significantly affect the risk of fraud are honesty and machiavellianizem. Narcissism and conscientiousness do not affect the risk of commiting a fraud. On the question, why would they report different from the actual situation in certain periods, the majority of respondents replied that due to the higher expected value, followed by individuals who were cheating because of higher wages, the minority were those who were not afraid to be discovered. Evaluation of these personality traits, which can have a significant impact on business, can serve as an aid in the selection of candidates for employment. This could prevent fraud and reduce the costs associated with them.

Author: Tatjana Horvat, PhD

Friday, April 1, 2016 | FM | International Cooperation

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