Abdulrahman A Al-Twaijry, Jamelah N. Alharbi
Fraud is a complex phenomenon afflicting all business related parties. Fraudulent reports undermine the trust of information published in the financial market, causing massive operating investments and losses, and they could lead to corporate failure. It also hinders economic development, business growth and foreign investment. Preventing and detecting management fraud is an exceptionally important concern of corporate governance. In this study, we endeavor to develop and examine management fraud risk indicators in the light of Fraud Triangle Model. 28 fraud risk indicators were classified in equal numbers in four categories, which are pressure/motivation, opportunity, rationalization/justification, and societal-level. Subsequent to theoretical development, these indicators went through empirical examination. A questionnaire was designed to get feedback from auditors working for firms operating in Saudi Arabia. The total valid returned questionnaires were 179 (response rate = 51%). The respondents' mean analysis confirmed the importance of the 28 indicators as appropriate signals of management fraud risk (aggregate mean = 4.08 or 82%). The means of individual indicators ranged between 3.77 (75%) and 4.38 (88%). Pearson correlation analysis revealed significant correlation between each pairs of the four categories. Similarly, the great majority of individual indicators were significantly correlated with the other indicators in the same group. These results may confirm the appropriateness of these groups of management fraud risk indicators to the Saudi environment.