Fraud Triangle Not Good Enough - 3956 Words

Playing Offense in a High-risk Environment Audit | Tax | Advisory | Risk | Performance The Unique Alternative to the Big Four  ® Playing Offense in a High-risk Environment â€Å"Today’s fraudster is clever and operates in an environment ripe for criminal activity. Economic unrest is making it easier for employees to find ways to set fraud in motion – and a new breed of offenders is finding cunning ways to do so. After more than 60 years, the classic fraud triangle of three elements or events that motivate an employee to cross the line has morphed â„ ¢ into Crowe’s Fraud Pentagon. Company boards and senior management must take an offensive stance against the five conditions that precipitate fraud with a clear plan that limits the†¦show more content†¦Famed criminologist Donald R. Cressey first identified three elements – opportunity (including general knowledge and technical skill), pressure, and rationalization – as the â€Å"fraud triangle† in the 1950s to explain why people commit fraud.3 Cressey’s classic fraud triangle helps to explain many but not all situations. Fraud is more likely to occur when someone has an incentive (pressure) to commit fraud, weak controls provide the opportunity for a person to do so, and the person is able to rationalize the fraudulent behavior. e nc ga ro Ar ation naliz o Rati Co mp ete nc e Crowe’s Fraud Pentagon TM O ppo rtun ity Pressure 4 Playing Offense in a High-risk Environment fraud occurs. Competence expands on Cressey’s element of opportunity to include an individual’s ability to override internal controls and to socially control the situation to his or her advantage. Arrogance or lack of conscience is an attitude of superiority and entitlement or greed on the part of a person who believes that corporate policies and procedures simply do not personally apply. This person, perhaps fueled by today’s obscene compensation structures, has complete disregard for the consequences bestowed upon his or her victims. Competence and arrogance play a major role in determining whether an employee today has what it takes to perpetrate a fraud. Unchecked, the five elements –Show MoreRelatedHow to Incorporate the Fraud Triangle Theory797 Words   |  4 PagesThe term of â€Å"fraud triangle† was developed by Dr. Donald Cressey, a criminologist who studied embezzlers. The three basic elements of fraud triangle include perceived pressure , perceived opportunity, and the ability to rationalize. It explains the nature of many fraud offenders and also become a tool to assess the risk of fraud. It is important to companies to incorporate the fraud triangle theory in order to reduce the risk of fraud within their organization. From my standpoint, companies shouldRead MoreThe Fraud Triangle Consists Of Three Different Parts1497 Words   |  6 PagesIn life, there are many times someone sees an opportunity that can better a situation in their life. Whether morally right or wrong some still take the action to better their life even if it can potentially be considered fraud. People tend to find ways to look past their morals. These situations can be something so small as not splitting the tips at your job evenly, fixing an old gambling debt, even cheating on your taxes. Some even take it as far as creating a fake business to receive money fromRead MoreVarious Types Of Occupational Fraud962 Words   |  4 PagesTypes of Fra ud The Association of Certified Fraud Examiners displays what is known as the Fraud Tree. 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Finally, the paper looks at internal and externalRead MoreInternal Control and Sunshine Center1322 Words   |  6 Pagesalso not a good control of monitoring. I would recommend them to use operating budgets and cash budgets. They can also use accounting records, these provide the details of business transactions. All major groups of transactions should be supported by either hard copy documents or electronic records. No transaction should be processed without management’s general or specific approval. They can keep important documents in fireproof vaults. 8. Identify the elements of the fraud triangle. WhichRead MoreInternal Control and Sunshine Center1330 Words   |  6 Pagesnot a good control of monitoring. I would recommend them to use operating budgets and cash budgets. They can also use accounting records, these provide the details of business transactions. All major groups of transactions should be supported by either hard copy documents or electronic records. No transaction should be processed without management’s general or specific approval. They can keep important documents in fireproof vaults. 8. Identify the elements of the fraud triangle. WhichRead MoreMidwest Orient Import Export Corporation806 Words   |  4 PagesImport Export Corporation Fraud Examination – ACT 565 Yuslizar Fanny (2600997) Today, in current business-world, fraud becomes a daily occurrence and it is a serious threat for all organizations, whether they are partnerships, corporations, limited liability companies or even non-profit companies. Once perpetrators start to commit fraud, they will not stop by themselves, they will continue and commit more with the bigger number as they realize how easy it is. Therefore, fraud prevention program is veryRead MoreFraud : A Broad Spectrum Of Individuals At Any Time1238 Words   |  5 PagesFraud can affect a broad spectrum of individuals at any time. Companies and consumers are losing billions of dollars every year. 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There are a variety of factors involved in the likelihood of fraud, but certain circumstances seem to be better predictors of the possibility of fraudulent reporting. In this paper, we will examine one of the largest hallmark scandals in history. Using this example as the backdrop, we will then discuss the circumstances in which the risk of accounting fraud is highest. We will also touch on the systematic aspect of how they can occur. This will lead into