The fraud triangle is a model for explaining the factors that cause someone to commit occupational fraud. It consists of three components: opportunity, pressure, and rationalization.
5 Must Know Facts For Your Next Test
Opportunity refers to the situation that enables fraud to occur, often due to weak internal controls.
Pressure is the motivation or incentive behind committing fraud, such as financial difficulties or personal vices.
Rationalization allows individuals to justify their fraudulent actions, making them feel that their behavior is acceptable.
Understanding the fraud triangle helps in designing effective internal controls to prevent and detect fraud.
Assessing all three elements of the fraud triangle can aid auditors and management in identifying potential risks.