Qualitative Study of Fraud Causes in the 21st Century

Abstract

The most popular frauds known in the early 21st century eroded investor and society confidence in the financial markets contributing to economic and social destruction. In response, the United States enacted the Sarbanes-Oxley Act (SOX) and the European Union issued several regulatory instruments, but the fraud cases have continued. Motivated by the idea that if we understand where the possible causes are, then the problem of fraud can be avoided or at least reduced in its dimensions and consequences. So, this study intends to understand the causes of fraud and its relevance, identifying their common points and also measuring if they changed in the post-SOX period. From the analysis carried out, it results that the lack of an ethical tone in top management is the cause that remains transversal to both sides of the Atlantic and to the two periods studied. In the post-SOX period, the fraudulent financial statements lost relevance, ceasing to be part of the most relevant causes, and internal control failures became one of the most relevant causes.