Fraud triangle
Pressure, opportunity and rationalisation.
Fraud is more likely when someone has a pressure or incentive (debt, targets), an opportunity (weak controls) and a way to rationalise it (“I’ll pay it back”). Organisations can most directly reduce opportunity, through controls.
On the exam
Weak controls are the opportunity. Internal audit evaluates fraud risk and controls, but management owns fraud prevention.
Related terms
- Fraud red flagsWarning signs that fraud may be happening.
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