Fraud triangle in public procurement: evidence from Indonesia

Ni Wayan Rustiarini, Sutrisno Sutrisno, Nurkholis Nurkholis and Wuryan Andayani

Journal of Financial Crime, 2019, vol. 26, issue 4, 951-968

Abstract: Purpose - This study aims to examine the effects of fraud triangle (pressure, opportunity and rationalization) on individual fraudulent behavior in Indonesian public procurement. Empirical research in this area is relatively sparse. Design/methodology/approach - Data were collected using laboratory experiments. Findings - The results revealed that fraudulent behavior is higher when an individual has high pressure and high opportunity. These factors play an important role in determining individual rationalization. Most of participants used “displacing responsibility” to rationalize their actions. This study also demonstrated that negative affect mediates the relationship between fraudulent behavior and rationalization. Research limitations/implications - First, fraudulent behavior research cannot be separated from social desirability bias. Second, the experiments only involved individual decision-making, not in groups. Finally, this study did not examine the effectiveness of rationalization in reducing negative affect. Practical implications - Over the years, the government has only focused on the identification of pressure and reduction of opportunities, but ignored individual psychological reasons. Considering that procurement fraud is always increasing, the government must more focus on individual reasons to design an effective prevention and detection system. Social implications - There are various conflicts of interest in public procurement budgeting. These conflicts can distort resource allocation and causes budget leakage. As a result, the government is incapacitated to achieve social and economic goals of the community. Originality/value - There is limited research about fraud in public procurement budgeting, especially in developing countries. In addition, the fraud triangle research, which focuses on rationalization is still limited.

Keywords: Fraud; Rationalization; Public procurement (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-11-2018-0121

DOI: 10.1108/JFC-11-2018-0121

Access Statistics for this article

Journal of Financial Crime is currently edited by Dr Li Hong Xing and Prof Barry Rider

More articles in Journal of Financial Crime from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().