The Fraud Triangle is a framework used to explain the factors that cause someone to commit occupational fraud. It was developed by Donald Cressey, a criminologist, and is widely used in forensic accounting and auditing.
🔺 The Three Components of the Fraud Triangle:
1. Pressure (Incentive or Motivation)
This is what drives the individual to commit fraud. It’s often personal and can include:
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Financial difficulties (e.g., debt, medical bills)
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Lifestyle pressure (e.g., wanting to maintain a lavish lifestyle)
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Job-related pressure (e.g., meeting performance targets or quotas)
🧠 Key Idea: The individual feels they have no other choice but to commit fraud to solve their problem.
2. Opportunity
This refers to the situation that enables fraud to occur. It typically involves weak internal controls or oversight, such as:
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Lack of supervision or audits
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Poor segregation of duties
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Easy access to assets or sensitive data
🧠 Key Idea: The person sees a clear path to commit fraud without being caught.
3. Rationalization
This is how the fraudster justifies their actions. They convince themselves that what they’re doing isn’t wrong, for example:
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“I’m just borrowing the money.”
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“I deserve this for all the work I do.”
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“They don’t pay me enough anyway.”
🧠 Key Idea: The fraudster mentally frames the act in a way that aligns with their moral compass.
🔁 Summary:
Fraud = Pressure + Opportunity + Rationalization
If any one of these elements is removed or minimized, the likelihood of fraud significantly decreases. That’s why organizations focus on:
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Strong internal controls (reduce opportunity),
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Ethical culture and support (reduce rationalization),
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Employee assistance programs (reduce pressure).
