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Fraud Triangle

Lesson
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Being able to predict who would be most likely to commit fraud is a great way to narrow the focus of an audit. Auditors use a framework called the fraud triangle to explain the three characteristics that are very common to those who commit fraud.

  1. Rationalization - The ability to excuse one's questionable activities as justified or of little importance.
  2. Opportunity - The belief that one has the ability to commit fraud without being punished.
  3. Incentive - The motive to commit the fraud. Some texts also refer to this as pressure.

It should be noted that many innocent people match one, two, or even all three legs of the fraud triangle, so it should not be used as the only means of judging guilt.

Interestingly, the acronym ROI contains the first letter of each side of the fraud triangle.

Question
The managers became suspicious when they realized that Thomas Gonzalez matched one leg of the fraud triangle.

Here are the relevant facts:

  • He worked in a department with unmonitored petty cash funds.
This is an example of what part of the fraud triangle?
Answer
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👉 Answer:

  • It was an opportunity.

👩‍🎓 Here are the steps to figure it out:

  • This offered a chance for benefit from fraudulent acts.
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