Category Archives: Fraud Mind

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Inside the Mind of Fraud

The study of relevant scientific research in the areas of psychological development, cognitive neuroscience, neurology and neural pathways, clinical studies, and all biological and psychological links to the occurrences of fraud, both on an individual and collective basis. All articles for this category are found by selecting the “Fraud Mind” category link. Specific research topics indexed under this category are found at the topic tag at the bottom of each posting.  

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A Cognitive Approach to Fraud Detection

Fraud detection is usually done by looking for red flags and various other cues of deceit. Research in auditing and psychology has questioned the effectiveness of these methods. Here we summarize work on constructing a new cognitive approach to understanding both success and failure at detecting financial statement fraud (Johnson, Grazioli, Jamal and Berryman 2001; Johnson, Grazioli, Jamal and Zualkernan 1992). We begin by analyzing the information processing problem than an auditor must solve to detect the presence of deceptive financial information. We then describe…

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A hot/cool-system analysis of delay of gratification: Dynamics of willpower

A 2-system framework is proposed for understanding the processes that enable–and undermine–self-control or “willpower” as exemplified in the delay of gratification paradigm. A cool, cognitive “know” system and a hot, emotional “go” system are postulated. The cool system is cognitive, emotionally neutral, contemplative, flexible, integrated, coherent, spatiotemporal, slow, episodic, and strategic. It is the seat of self-regulation and self-control. The hot system is the basis of emotionality, fears as well as passions–impulsive and reflexive–initially controlled by innate releasing stimuli (and, thus, literally under “stimulus control”):…

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All Negative Moods Are Not Equal: Motivational Influences of Anxiety and Sadness on Decision Making

Previous studies of the effect of emotion on decision making have been too simplistic, comparing only positive and negative emotions. This study looks into the effects of different kinds of negative emotions, namely anxiety and sadness, and finds that they have different influences on decision making. Sad people were more interested in risky but potentially highly rewarding options, while anxious people preferred safe but lower yielding options. The authors propose that it was not the risk that was appealing to sad people, but rather the…

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Amygdala Responses to Emotionally Valenced Stimuli in Older and Younger Adults

This article argues that increases in age lead to a redistribution – as opposed to a decrease – in cognitive functioning when processing emotional information.  This is evaluated by measuring the activity of the amygdala, a region of the brain associated with memory and emotional attention. Previous studies showed that older adults tend to retain less negative emotional information than do younger adults.  There is a tendency for this reduction to be interpreted as cognitive decline with age. This article demonstrates that the activity of…

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Conversation, Information, and Herd Behavior

Experimental evidence shows that an important reason why people tend to imitate others, to exhibit “herd behavior” is that they assume that the others have information that justifies their actions. The information cascade models of Banerjee [1992] and Bikhchandani et al. [1992] are significant developments in showing some general equilibrium and welfare effects of such rational imitative behavior. But these models as specified may be of limited applicability since they assert that differences across groups in herd behavior can be attributed to the random decisions of…

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