[Fraud Risk Management] Based on research regarding the criminogenic tendencies of organizations, employees are more likely to engage in fraudulent behavior when given a direct order to do so by a superior due to an inherent desire to obey people in positions of authority.

The statement is correct. Seminal research in social psychology, most notably the obedience experiments conducted by Stanley Milgram in the 1960s, demonstrated that individuals have a strong tendency to comply with instructions from a person perceived as a legitimate authority figure. This principle is a cornerstone of understanding white-collar crime and organizational fraud. In a corporate environment, the hierarchical structure reinforces this dynamic, making it more likely for an employee to engage in fraudulent acts when ordered to do so by a manager or executive. The authority of the superior can provide the subordinate with a powerful rationalization, such as "I was just following orders," thereby neutralizing personal ethical objections.

This statement is not False. To claim it is false would be to ignore a large body of foundational research in social psychology and criminology that has been consistently applied to explain organizational misconduct. The power of authority to influence behavior, even unethical or criminal behavior, is a well-documented phenomenon and a key consideration in fraud risk management and prevention.

1. Association of Certified Fraud Examiners (ACFE). (2023). Fraud Examiners Manual

International Edition.

Location: Section 2

"Why People Commit Fraud

" subsection "Criminology and Fraud."

Content: The manual explicitly discusses the Milgram experiments on obedience to authority as a key psychological factor explaining why subordinates participate in fraud schemes at the direction of their superiors. It notes that "Milgram’s experiments showed that most people will obey orders from a person they perceive to be a legitimate authority figure

even if those orders are contrary to their beliefs and personality" (p. 2.117).

2. Anand

V.

Ashforth

B. E.

& Joshi

M. (2004). Business as usual: The acceptance and perpetuation of corruption in organizations. Academy of Management Perspectives

18(2)

39-53.

DOI: https://doi.org/10.5465/ame.2004.13837437

Location: Section on "Rationalizing and Socializing Newcomers

" specifically discussing the rationalization tactic of "denial of responsibility."

Content: The authors explain that one of the primary ways unethical behavior is perpetuated is through rationalizations. The "denial of responsibility" tactic is where individuals contend they are not responsible for their actions because they were acting under orders from a superior. This directly supports the idea that an order from an authority figure facilitates fraudulent behavior.

3. Sutherland

E. H. (1940). White-Collar Criminality. American Sociological Review

5(1)

1–12.

DOI: https://doi.org/10.2307/2083937

Location: General thesis of the paper.

Content: Sutherland's theory of "differential association" posits that criminal behavior is learned in interaction with other persons in a process of communication

principally within intimate personal groups. In an organizational setting

a superior is a key figure in this group. When a superior orders or models fraudulent behavior

they are effectively "teaching" and normalizing it for the subordinate

making the subordinate more likely to comply and engage in the activity.