Fraud Triangle
Lesson:
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.
- Rationalization - The ability to excuse one's questionable activities as justified or of little importance.
- Opportunity - The belief that one has the ability to commit fraud without being punished.
- 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.
The managers became suspicious when they realized that Donna Martinez matched one leg of the fraud triangle.
Here's what you know:
- She had just purchased an expensive new home.
This is an example of what part of the fraud triangle?
Answer:
- It was an incentive.
Explanation:
-
This provided a strong motive to commit questionable activities.