Fraud Triangle
motivation, opportunity, rationalization
The Fraud Triangle is a framework used to explain why individuals commit fraud. It consists of three elements or conditions in which fraud can occur:
1. Motive – It refers to the reason why an individual decides to commit fraud. This could be financial gain or personal benefit, such as revenge or the desire to be recognized.
2. Opportunity – It represents the conditions or environment that allows an individual to commit fraud. This could be a lack of internal controls, weak oversight, or insufficient monitoring.
3. Rationalization – It represents how individuals justify or rationalize their fraudulent behavior. This could be done by convincing themselves that they are entitled to what they are stealing, or by thinking that the organization is not being fair to them.
The Fraud Triangle is an important tool for organizations to identify potential fraud risks and to take necessary measures to reduce those risks. By addressing any of the three elements of the triangle, organizations can make it harder for individuals to commit fraud and thereby prevent financial losses and damage to the organization’s reputation.
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