Opportunities for fraud in Greek Municipalities; The International Fraud Triangle framework

Abstract

Abstract

The purpose of this paper is to identify fraud risk factors through the lenses of the International “Fraud Triangle” in Greek Municipalities and research whether opportunities exist that make the Municipal organizational environment conducive to fraud. Secondary data collected and selected from annual audit reports as an outcome of ex ante and ex post audits conducted by the Supreme Audit Institution in Greece (SAI). Empirical audit report data were examined using qualitative document analysis and the red flag approach to identify vulnerabilities and irregularities with a recurring pattern. The findings indicate serious vulnerabilities in Greek Municipalities with the epicenter in the public procurement processes, internal control as well as various administrational dysfunctions, which contribute to the creation of an organizational environment conducive to fraud. The International Fraud Triangle is also proven useful in identifying additional risks that increase the opportunity for fraud occurrence from the political, legal and cultural environment within which Municipalities operate. Valuable information is generated, thus building a useful knowledge base that can be used by academics, regulatory agencies and auditors in the fraud examination field. There are few, if any, studies in the Greek context utilizing audit reports by the Supreme Court Audit and the Fraud Triangle as research instruments.

Keywords: Fraud Triangle, Supreme Audit Institutions, Risks, Greek Municipalities