I Like Accounting

Fraud Triangle

Lesson
📖 Click Here for Lesson 📕 Click Here to Hide 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.

  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 Charlie Garcia matched one leg of the fraud triangle.

You've been provided with the following information:

  • He had significant medical bills.
This is an example of what part of the fraud triangle?
Answer
📖 Click Here for Answer & How to Solve 📕 Click Here to Hide Answer

👉 Answer:

  • It was an incentive.

👩‍🎓 Here's how we arrived at the answer:

  • This provided a strong motive to commit questionable activities.
Random FAR 🔀 Try Again 🔁