Application of Fraud Triangle Theory: Case Study for EcoGreen International Group Limited

Abstract

Fraud triangle theory is one of the central analytical lenses for assessing how and why organizations become exposed to fraudulent behaviour. At the same time, the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) Internal Control – Integrated Framework (hereafter ‘COSO Framework’) serves as a benchmark for designing, implementing and evaluating effective internal controls. This article applies the fraud triangle theory and COSO Framework to the case of EcoGreen International Group Limited (Stock Code: 02341HK) by examining its business operations, governance arrangements and the sequence of events that culminated in substantial discrepancies between reported and confirmed bank balances, indicative of a large-scale cash flow fraud scheme. The analysis integrates fraud triangle theory with a COSO-based internal control assessment to investigate how opportunity, pressure and rationalization interact with structural weaknesses in EcoGreen’s control environment, risk assessment, control activities, information and communication and monitoring. In addition, the article evaluates the performance of the external auditor, with particular attention to failures in professional scepticism, fraud risk assessment and audit procedures responsive to elevated fraud risks. The findings reveal how IT fragmentation and auditor inertia extended traditional fraud triangle dynamics beyond prior COSO case studies, advancing theory for modern cross-border contexts. Insights from this case inform researchers, regulators, auditors and governance bodies about key aspects of fraud risk management, auditor responsibilities and limitations of current control frameworks.