Financial fraud in Chinese accounting firms explained by fraud hexagon theory

This study investigates the applicability of the Fraud Hexagon Theory (S.C.C.O.R.E. Theory) in explaining financial fraud within Chinese accounting firms, addressing a critical gap in understanding how Stimulus, Capability, Collusion, Opportunity, Rationalization, and Ego (S.C.C.O.R.E.) influence fraudulent behavior in this context. Employing a quantitative approach, we collected data from 238 professionals in Chinese accounting firms via structured questionnaires, ensuring ethical compliance through anonymized responses and informed consent. Structural Equation Modeling (SEM) was utilized to analyze the relationships between the six fraud determinants and their interaction with Corporate Governance as a moderating variable. Key findings reveal that Stimulus, Capability, Collusion, Opportunity, and Ego exhibit significant positive effects on Fraud Behavior, while Rationalization showed no statistical significance. Notably, Corporate Governance negatively moderates the relationship between Opportunity and Fraud Behavior, suggesting that robust governance mechanisms can mitigate exploitable opportunities. This study contributes empirically by validating the Fraud Hexagon Theory in China’s unique institutional and cultural setting, contrasting with prior Western-centric studies, and offers actionable insights for policymakers and accounting firms to refine anti-fraud frameworks. Practically, the results underscore the need for ethics training targeting Ego-driven rationalizations and regulatory reforms to strengthen governance oversight. Methodologically, the research advances fraud literature by integrating SEM with a context-specific moderating analysis, addressing limitations in traditional linear models. Ethical considerations, including participant confidentiality and voluntary participation, were rigorously upheld throughout the study. These findings provide theoretical and practical guidance for corporate managers, regulators, and educators in combating financial fraud and fostering professional integrity in China’s rapidly evolving financial sector.