Fraud Triangle

In: Business and Management

Submitted By khill1027
Words 1080
Pages 5
You Decide
Jan. 24, 2011

When evaluating this case using the three elements of the fraud triangle I have concluded that the potential pressures for Chris to commit fraud are greater than for others. The pressure is from Chris himself because he wants what others have or what he doesn’t have. This is due to the fact that Chris is young and impressionable may feel as though he doesn’t make enough money to obtain the material possession he desires or see others with. He may also be of the mindset that “he wants it now” it being the latest technology. This younger generation seems to feel entitlement instead of working and earn it. This may be due to their upbringing. Although my generation had things we worked for them and with our parents/families help we were able to obtain those things we wanted. We live in a technology savvy society so if you don’t have the last gadget then you may be looked upon as not having the means to acquire these things or not technologically savvy enough to want or have these items. Having the latest gadgets is a societal status symbol, the more you have…. the more you have meaning money. Chris may have friends that have the latest and greatest technology and he maybe envious of them and desire to acquire those things as well but not on his salary in his mind. So he must find a way to get either more money or a way to acquire the latest and the greatest in technology.
The potential opportunities for Chris to commit fraud are great. He has access to a fake credit card which is used for testing purposes but it appears from his actions Chris is doing more than testing the card, he has found a way to make it possible to use the card. I’m not sure if there is any collusion going on but from the information given it is clear that Chris is committing fraud. His actions says so and he hasn’t mention any family member being…...

Similar Documents

How to Incorporate the Fraud Triangle Theory

...The term of “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 should incorporate the fraud triangle from the following aspects. First, companies should perform background investigation in order to uncover the perceived pressure. The factors that create pressure include personal financial pressure (high levels of debts and poor credit rating), addictions such as drugs, gambling, and lifestyle issues such as living beyond one's means. According to Bliss (2012), “auditors and fraud examiners generally consider pressure and rationalization to be internal qualities that can't be seen or assessed. Resources are focused on opportunity, which can be reduced with internal controls.” As a consequence, companies should focus more on risk prevention. They can uncover some undesirable personal traits in advance, when they are making hiring decision. If the management understands the motivation of an offender, several background checks could be useful in preventing fraud. For instance, “the civil records search can find information on any non-criminal litigation....

Words: 797 - Pages: 4

The Fraud Triangle

...The Fraud Triangle 9/22/2012 Allison Walton | The Fraud Triangle The fraud triangle are conditions for fraud arising from fraudulent financial reporting and misappropriation of assets. These conditions are: a. Incentive/Pressure b. Opportunities c. Attitude/Rationalization The fraud triangle is depicted by the following image: Incentive/Pressure Management or other employees will have incentives or circumstances of pressure to commit fraud. If the decision is made by management to report fraudulent financial statements, the most common reason for this will be threat by economic, industry or entity operating conditions to the financial stability and profitability of the company. Excessive pressure is placed on management to meet the forecast of an analyst, company projections or to repay debt obligations. The personal net worth of the stockholders and board of directors may be materially threatened by the company’s financial performance, and management may feel obligated to meet these demands. Management may inflate stock prices to preserve their reputation and be required to do whatever it takes to meet the goal. The bonuses of management may be tied to the company’s earnings and this is a big motivator for fraudulent reporting (Fox School of Business 2009). The misappropriation of assets in a company may be done because of personal financial pressure such as a home foreclosure, or a non-sharable problem such as drug use or gambling debts (Wells......

Words: 978 - Pages: 4


...OUTLINE FOR TRIANGLE Misery lane-Manhattan’s Charity piers was where the bodies were laid out whenever disaster struck. March 26, 1911-makeshift morgue at end of pier where 100 women and two dozen men were laid out. March 25, 1911- Triangle fire took place. Most important and deadliest work place disaster for 90 yrs. Fire lasted ½ hour. 146 dead. Workplace safety was scarcely regulated, workmens comp was considered newfangled or socialist. Triangle fire was different because it was the crucial moment in a change of events-events that forced fundamental reforms fro the political machinery of New York, and, after New York the nation, America experienced a huge immigration, transfer of brain and labor power from abroad (especially from Europe) Max Blanck and Isaac Harris: prominent immigrant factory owners ‘Born in Russia, both men had immigrated to the United States in the early 1890s, and, like hundreds of thousands of other Jewish immigrants, they had both begun working in the garment industry. After a decade, the two men entered a partnership that would propel their careers and earn them the nickname of New York's "Shirtwaist Kings." T hey decided to enter a partnership that would capitalize on Blanck's business sense and Harris' industry expertise. In 1900, they founded the Triangle Waist Company and opened their first shop on Wooster Street. At the turn of the century, the shirtwaist was a new item. arris and Blanck moved their company to the ninth floor of the...

Words: 2293 - Pages: 10

Fraud Triangle

...  Chapter 2 Who Commits Fraud and Why I, Dennis Greer, am making this statement on my own, without threat or promises, as to my activities in regard to the activity of kiting between Bank A and Bank B. As of May 19XX, I was having extreme emotional and financial difficulties. For religious reasons, I was required without notice to move out of where I was living, and I had no place to go. Also, my grandmother—the only family member I was close to—was dying. I had to live out of my car for 3 1/2 weeks. At the end of this time, my grandmother died. She lived in Ohio. I went to the funeral and I returned with a $1,000 inheritance. I used this money to secure an apartment. The entire sum was used up for the first month’s rent, deposit, and the application fee. From that time, mid-June, until the first part of August, I was supporting myself on my minimum-wage job at the nursery. I had no furniture or a bed. I was barely making it. I was feeling very distraught over the loss of my grandmother and problems my parents and brother were having. I felt all alone. The first part of August arrived and my rent was due. I did not have the full amount to pay it. This same week, I opened a checking account at Bank B. I intended to close my Bank A account because of a lack of ATMs, branches, and misunderstanding. As I said, my rent was due and I did not know how to meet it. On an impulse, I wrote the apartment manager a check for the amount due. I did......

Words: 15238 - Pages: 61


...As is mentioned in the “The CPA Journal”, “many studies suggest fraud is more likely to occur when someone has an incentive (pressure) to commit fraud, weak controls or oversight provide an opportunity for the person to commit fraud, and the person can rationalize the fraudulent behavior (attitude).” This is known as the fraud triangle. There are two types of fraud: fraudulent financial reporting and misappropriation of assets. For the first one, this kind of frauds came from the top management. Most of the pressures are the decline in earnings, which may influence the financing as well as the stock price. Moreover, the top management is afraid to get fired. At the same time, since the financial statement include many significant judgments or estimates, which maybe the opportunity for the top management to commit frauds. For the attitude, the top management displays a significant disregard for the financial report process. These factors will increase the risk of fraud. Secondly, misappropriation of assets, this kind of frauds came from the employees, such frauds like this may not have a great impact on the company. The employees with much more financial pressures when the economic situation getting bad. Moreover, the weak internal controls are the major source of opportunity to the employees; the examples include the inadequacy of the assignment of responsibility. And for the rationalization, the top management displays a significant disregard for controls and ethical......

Words: 799 - Pages: 4

Fraud Triangle

...Fraud triangle model is considerably suitable in analyzing the behavior of the two main individuals-Stanley Goldblum and Fred Levin-in this case. The first condition is pressure, which is the incentive and motivation for fraud commitment (Marhsall, XXX). The temptation of high stock price in order to launch stock for stock basis acquisition and receive bonuses is the main financial pressure for Goldblum and Levin to create fake policies and manipulate their firms’ financial reports. In addition, the greedy and overbearing nature also contributed to the fraud. When Levin found out the employees using computer program to create fake policies, he encouraged the programmers’ behavior instead of stopping them. The second condition of fraud triangle is opportunities. These include the failure of auditing, poor internal control and supervision of board of directors, which all have been explained in the previous paragraph. The last condition, rationalization, also played an important part in this scandal. The managers and the employees all believed what they have done were for the better development for the company and rationalize away their integrity. They all forgot they have the corporate responsibility for the stakeholders and were inconsistent with ethical principles such as honesty and respect for its customers. As for the economic aspect, American middle class had been suffering in the stagflation economy condition due to poor monetary control. The high inflation rate......

Words: 468 - Pages: 2

Persepsi Mahasiswa Akuntansi Terhadap Fraud Triangle Sebagai Penyebab Kecurangan Atas Laporan Keuangan

...1 PERSEPSI MAHASISWA AKUNTANSI TERHADAP FRAUD TRIANGLE SEBAGAI PENYEBAB KECURANGAN ATAS LAPORAN KEUANGAN KHALIDA UTAMI A1C 009 077 FAKULTAS EKONOMI UNIVERSITAS MATARAM ABSTRACT The objective of this study is to examine the accounting students' perceptions of fraud triangle as a factor contributing to financial statements fraud. Fraud triangle consists of opportunity, pressure and rationalization. This study uses primary data collected from questionnaires distributed to the respondents, which are undergraduate students from class of 2008 and 2009 of Faculty of Economics, University of Mataram. Based on probability sampling technique, a total of 115 accounting students, who has attended courses in Auditing II and Auditing Practices, are accounted as sample of this study. Hypotheses analysis based on multiple regression analysis suggest that there is relationship between the fraud triangle (opportunity, pressure and rationalization) and fraudulent financial statements. The results also suggest that that accounting students have a good perception of the fraudulent financial statements. Furthermore, based on the students’ perception, the result suggests that pressures are the most likely factor to the fraud on financial statement. Keywords: fraud triangle, financial statements fraud, accounting students’ perception. 2 1. PENDAHULUAN Laporan keuangan merupakan sarana bagi perusahaan untuk menyediakan informasi bagi para pemakai (user). Sesuai dengan......

Words: 7625 - Pages: 31

Fraud Triangle

...INTRODUCTION   There was large actual deficit of 12.1$ found in Violet Bay. A special grand jury investigation then uncovered numerous internal control problems that contributed to the deficit. In this memorandum, I will discuss Violet Bay School District’s control systems. I will evaluate the control system using the framework in COSO framework and identify control mechanisms. I will also address the components of the fraud triangle that were present at VBSD. EVALUATION OF CONTROL SYSTEM   VBSD does not create a good control environment with commitment and ethical values well demonstrated. Otherwise, Spigot, the superintendent, acts as having a “dictatorial management style” Although, there is reporting structure established, however, neither Robertson nor Spigot conformed to it. Spigot executes the contract before the City Office’s proposal. For the Risk Assessment, VBSD has unrealistic assumptions used in preparation of the operating budget. Instead of identifying and analyzing risks, the CFO tried to ignore the risks. Furthermore, VBSD lacks control activities and communication systems. To be exact, firstly, there is no effective way to track budget and payroll expenditures. Also, VBSD needs more strict policies and procedures to execute proposal such as the large transfers. For the communication, the current reporting system is not so effective. The deficit information was not conveyed to the School Board as soon as possible. Nearly all the communication process......

Words: 272 - Pages: 2


...Classroom Case Demonstration “Something’s Fishy at Jones Company – from Investigation to Confession.” Designed for the classroom or a seminar, an intrepid seasoned internal audit manager and an inexperienced but willing staff auditor investigate suspicious financial activity at Jones Company. Their discoveries reveal their hunch was right, and they are able to stop the fraud. This case can be used in a classroom or seminar setting to: ● Discuss the Fraud Triangle and the importance of symptoms ● Discuss accounting symptoms of fraud ● Perform financial statement analyses to determine if fraud is suspected ● Identify and test a fraud hypothesis ● Analyze an interview ● Analyze an interrogation ● Draw conclusions and prepare fraud reports The case requirements include: 1. Perform horizontal and vertical analyses of the financial statements. 2. Describe other financial statement analyses that the auditor could have performed. 3. Describe a public records search. 4. Analyze this case using the fraud triangle. 5. What is the fraud hypothesis in this case? Session Topics This case includes teaching notes (provided on the conference website) and a video (30 minutes) depicting a suspect interview and a separate interrogation. The video highlights verbal and non-verbal cues to look for when interviewing and a non-confrontational approach to interrogation. During this session we will view the video and discuss how the case might be used in the classroom or seminar. Copies of the video......

Words: 9218 - Pages: 37


...FRAUD: FRAUDULENT ACTIVITIES A REVIEW OF THE CRIMES Introduction Investigations into fraudulent activities have brought much attention to Federal Government spending. The impact of fraud and the corruption caused by internal parties or external entities targeting government funds can be substantiated. For example, the Association of Certified Fraud Examiners (ACFE) in a 2012 Report to the Nations on Occupational Fraud and Abuse projected a global fraud loss of more than $3.5 trillion per year. Fraud and corruption is a common problem that is all over the world. The U.S. Nuclear Regulatory Commission (NRC, 2006) wrote in its “Fraud Awareness” handbook that fraud is an enormous problem that can waste valuable funding and other resources. Fraud is a potential problem that threatens the Federal Government mission of protecting the health and welfare of the American peoples. According to the Legal Information Institute (LII) at Cornell University Law School fraud precise legal definition varies in the area over which legal authority extends or the given power or authority that has exclusive jurisdiction to decide legal matters. LII defines fraud as “deliberately deceiving someone else with the intent of causing damage.” On December 2nd 2012 Special Agent Jason Muldrew of the Air Force Office of Special Investigations at Kunsan Air Base, Republic of Korea printed news story said, “Fraud is defined as the crime of obtaining money or other benefits by deliberate......

Words: 3344 - Pages: 14

Fraud Triangle

...Worldcom Fraud Investigation Use the Fraud Triangle and Fraud Scale to critically analyse the actions of Bernie Ebbers and Scott Sullivan during the WorldCom saga/ What does your analysis suggest? Dennis Greer’s fraud triangle is a key framework in analysing the ‘factors that cause someone to commit occupational fraud’ (ACFE-The Fraud Triangle, Association of Certified Fraud, Examiners Available from: [January 2014]). The three elements that make up the model are perceived pressure, perceived opportunity and rationalisation. In reference to the events of WorldCom, which has been labelled to date, ‘one of the biggest accounting scandals in history’ (CNN Money- WorldCom’s Financial Bomb, Available from: [June 2002]) the initial pressures that were the driving force behind the actions of CEO, Bernie Ebbers and CFO Scott Sullivan are quite vast. Firstly Ebbers, was faced with the managerial strain of financial pressure on management due to the decline in the economic environment and the high expectations of Wall Street. As a result, he was aware that the key to growth was in acquisition and mergers, which required an illusion of a solid investment portfolio and therefore ‘a heavy dependence on the performance of WorldCom shares’ (Forbes- Bernie Ebbers Guilty, Available from: http:// In addition, Ebbers was......

Words: 316 - Pages: 2

The Fraud Triangle

...The Fraud Triangle Abstract In 2002 SAS No. 99, Consideration of Fraud in a Financial Statement Audit describes the difference between material misstatements due to errors and intentional fraud and defines two types of intentional fraud: fraudulent financial reporting and misappropriation of assets. SAS No. 99 also introduced D. R. Cressey’s theory of the fraud triangle which is so named because it consists of three conditions that are generally present when fraud occurs: incentive/pressure, opportunity, and attitude/rationalization. Introduction This paper reflects on SAS No. 99 to describe the difference between material misstatements due to errors and intentional fraud which includes fraudulent financial reporting and misappropriation of assets. It also describes the fraud triangle theory proposed by D. R. Cressey. Think back to when you were in elementary school during fire safety week when the fire department would come and visit. Do you recall the fireman explaining what can be referred to as the fire triangle? That is, the description of what is necessary for fire to exist and continue. In order to create fire you need three things: fuel, oxygen, and heat. To put out (or prevent) the fire you would need to remove one of those three sides to the triangle. You could stop the fire by removing either the fuel, oxygen, or heat. This is a simple analogy for the fraud triangle. Just as there are three sides to the fire triangle there are three sides......

Words: 2106 - Pages: 9


...Fraud is defined as the, “intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right” (Fraud, n.d.). However, not all fraud is intentional. According to Kranacher, Riley & Wells (2011), there are four elements to fraud: a material false statement, knowledge that the statement was false when it was spoken, reliance on the false statement by the victim, and damages resulting from the victim’s reliance on the false statements (pp. 2-3). Negligence within a company, also referred to as unintentional fraud, implies a party not living up to minimal standards of care (Kranacher, Riley & Wells, 2011, p. 61). When an employee commits an honest mistake without the intention of deceiving the employer or gaining an advantage over others is considered negligence. Negligence has five legal elements: duty, breach, cause in fact, proximate case, and damages (Kranacher, Riley & Wells, 2011, p. 61). All elements need to be present for negligence to be considered. In 2001, Enron became the center of one of the biggest fraud scandals of the decade. The executive officers Kenneth Lay, Andrew Fasto, Jeffrey Skilling including the accounting firm Arthur Andersen committed the biggest financial fraud against its employees and stakeholders. Enron’s officers drove the company into bankruptcy causing thousands of employees to lose their jobs as well several billions of dollars in lost retirement accounts (Kranacher, Riley & Wells...

Words: 1036 - Pages: 5

Discusses How an Organization Should Incorporate the Fraud Triangle to Reduce the Risk of Fraud/Misconduct Within Their Organization. Discuss Each Element of the Triangle and Identify Programs and Controls to Address

...”According to the Association of Certified Fraud Examiners, public and private organizations in the United States, on average, lose about seven percent of their annual revenues to fraud” (1). This numbers has continued to grow over the past fifteen years, and with the economic turmoil and increasing fraud, the need to reduce the risk of fraud is now more important than ever. Before we can review the ways to reduce fraud, we first need to define what it actually is. As defined in our textbook, “Fraud, sometimes referred to as the fraudulent act, is an intentional deception, whether by omission or co-mission, that causes its victim to suffer an economic loss and/or the perpetrator to realize a gain”. There are three major categories of fraud. The first, assets misappropriation, is when one who is entrusted to manage the company’s assets steals from it by ways such as theft or misuse. The second is corruption, which involves the unlawful misuse or influence over a transaction to gain a personal benefit that is through unlawful and unethical means. A few examples of corruption would be bribery, embezzlement or intentional disregarding a conflict of interest. The third is financial statement fraud which involves the intentional misrepresentation of financial or non-financial information to intentionally deceive the financial statement users whom relied on such information to make material decisions. A few examples would be an Organization that was overstating revenues,......

Words: 1276 - Pages: 6


...Donald R Cressey hypothesis became known as the “fraud triangle.” He studied the reasons behind the fraud. What led them to commit the fraud. His fraud triangle can explain of occupational offenders but not all. According to Cressey: “The first point represents a perceived non-sharable financial need which fell into six basic categories: violation of ascribed obligations, problems resulting from personal failure, business reversals, physical isolation, status gaining, and employer – employee relations.” The second element of the fraud triangle is: The perceived opportunity. Cressey’s view is there are two components to the perceived opportunity: general information and the technical skill. The final point stands for rationalization. This is where the fraudster justifies the stealing. Cressey placed these individuals into three categories: independent businessmen, long-term violators, and absconders. His research was published in Other People’s Money: A study in the Social Psychology of Embezzlement. Cressey’s final hypothesis was: Trusted persons become trust violators when they conceive of themselves as having a financial problem which is non-shareable, are aware this problem can be secretly resolved by violation of the position of financial trust, and are able to apply to their own conduct in that situation verbalizations which enable them to adjust their conceptions of themselves as trusted persons with their conceptions of themselves as users of the entrusted......

Words: 717 - Pages: 3

VIDIO LAINNYA | └ Computers/Tablets & Networking | Samsung Gear S3 Classic / Frontier Stainless Steel Strap Watch Band Bracelet UK