What is the Fraud Triangle?

May 17, 2012 — 1,878 views  
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Three things must be present for fraud to occur: pressure, rationalization and opportunity. These aspects make up what is referred to as the fraud triangle. Companies and other entities must be aware of each in order to reduce overall fraud risk, according to Boise State University.

The first point on the fraud triangle is pressure. This is whatever stress or pressure is causing a person to commit fraud in the first place. Often times the pressure stems from a financial need or burden, explains the university. Anything from an addiction to a medical bill can pressure someone into committing fraud.

Rationalization is the next point of the fraud triangle. The Minnesota Office of the State Auditor says this is when the person committing the fraud realizes what they are doing and attempt to explain or justify their actions. The frauder might claim such a large corporation will never notice such a small amount, or that they will pay the company back eventually.

Finally, a person needs the opportunity to commit the fraud. Boise State says opportunity can be created by a variety of things such as poor management, weak internal workings or even a connection with an employee.