Cognitive rationalization in occupational fraud: structure exploration and scale development

Abstract

The structure and measurement of occupational fraud rationalization as one of the motivations for fraudulent behavior has been a major obstacle in theoretical research and practical problems. In order to answer the fundamental question, “What does cognitive rationalization of occupational fraud involve?,” this paper explored the structure and scale development of the internal psychological factors of occupational fraud rationalization. Several research methods were used for this purpose, such as data collection, research interviews, review & verification, project purification, structural verification, and reliability & validity test. The results showed that, based on the internal structure, occupational fraud rationalization presented second-order three-dimensional and first-order eight-dimensional factors. Further, a formal scale containing 27 items related to the structure of the metric was constructed to measure the occupational fraud rationalization. In terms of variable correlations, this paper empirically tested the criterion validity of occupational fraud rationalization from the perspective of personality traits. The result revealed a significant positive (negative) correlation between Machiavellian traits (empathy traits) and occupational fraud rationalization, respectively. In conclusion, this paper provides an attempt to address the cognitive and measurement challenges of occupational fraud rationalization, expanding the application and development of moral disengagement theory in the field of occupational fraud and laying some groundwork for subsequent research and development.

Hospice Fraud: Predicting Ability and Intent

“…The review of the literature yielded two tools related to the identification of fraud ability and intent. The first tool was designed by Yang and Chen (2023) to assess the ability to rationalize fraud actions, which is a theoretical concept embedded in the fraud triangle and the fraud diamond models. Likewise, the second tool, designed by Lin et al (2022) to measure fraud intent, incorporates concepts related to opportunity, rationalization, pressure, and capability.…”

“…Once again, item discrimination testing was conducted using the same parameters as in the pilot test (SD > 0.50; p = .05; a factor loading rejection threshold of 0.05; cross-factor loading rejection threshold of 0.40). Three items failed to meet inclusion criteria and were removed from the occupational fraud rationalization tool, leaving a total of 29 items that loaded into the three factors: cognitive reconstruction, responsibility distortion, and value devaluation (Yang & Chen, 2023). The three-factor model was statistically supported (p = .001) through confirmatory factor analysis.…”

“…Personality traits found to be related to fraud behaviors include those associated with what has been characterized as a Machiavellian personality, which manifests as heightened self-interest, the ability to manipulate others, and a willingness to carry out unethical acts. Machiavellians are not only more likely to commit fraud but to possess the ability to subvert feelings and guilt by rationalizing their behaviors (Gonzalez & Kopp, 2017;Yang & Chen, 2023). Further, several researchers have theorized that fraudsters are generally believed to possess Machiavellian traits that predispose them to manipulation, immorality, deceit, and unethical behaviors (Triantoro et al, 2020).…”

“…The information gleaned through the review of the literature established the framework for a qualitative research study with 21 incarcerated fraudsters regarding their motives, emotions, and rationalization for committing occupational fraud. The data gleaned from the interviews was analyzed through content analysis using a three-step sequence involving open coding, axial coding, and finally, selective coding (Yang & Chen, 2023). Axial coding resulted in the development of eight categories, which were then further distilled into a total of three categories that represented the three dimensions of how fraudsters rationalize occupational fraud.…”

“…The reliability of the instrument, on the whole, was demonstrated with a Cronbach's α coefficient of .93, with a cutoff score of 0.70 denoting acceptability (Yang & Chen, 2023). The reliability of the latent variables was demonstrated with a composite reliability score ≥0.60.…”