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FRAUD EXAMINATION& THE FRAUD TRIANGLETRACY RODRIGUEZFLORIDA ATLANTIC UNIVERSITYACG 6686Fraud Examination & the Fraud Triangle1
Abstract:This paper explains the Fraud Triangle framework, originally developed by the American criminologist Donald Cressey from his interviews with fraudsters. I will begin todescribe three concepts of the Fraud Triangle – pressure/motivation, opportunity, rationalization (Schuchter, A., Levi, M., 2016)Fraud is a subject that garners a lot of attention from various organizations, regulators, auditors, and other stakeholders. As we see changes in technology companies are asking auditors to help them prevent and detect fraudulent acts. Spotting fraud is difficult and requires a great deal of knowledge about where fraud comes from and how it can be committed and hidden from other parties. I aim to explain the Fraud triangle and what Forensic Accountants need to do in order to assess the risk of fraud going undetected. Forensic Accountants and others say that though opportunity is a necessary component it is not enough of a condition for employees to commit the fraudulent act. Michael Levi explained “Rather than rationalizations, there is a ‘fraud-inhibiting inner voice’ before the crime, which normally deters an individual from fraudulent behavior.” (Schuchter, A., Levi,M., 2016)Technological advancements and the increased global business environment provide forboth greater enhancements as well as additional challenges for concealment of fraud, but it also helps to prevent, detect and investigate employee fraud. I hope to broaden the knowledge of how external auditors and forensic accountants can help stakeholders by showing them how and why fraud occurs, and ways to prevent or detect occurrences. (Sujeewa, M., Dharmaratne, I., 2018)Fraud Examination & the Fraud Triangle2
IntroductionIn this paper I will discuss the Fraud Triangle, Fraud Examination and the link between the two concepts. I will first define the Fraud Triangle and how it is helpful in a business environment. Then I will explain what Fraud Examination is. In addition to the definitions of the two concepts I will show how they can be linked in helping with a fraud examination. The Fraud Triangle can be a useful in understanding the why a person would commit fraud, it should only be one of many components visited for an overall audit risk assessment. I will explain why I believe that, and; what I would do if I were a Fraud Examiner. Lastly, I will outline my states requirements to become a Forensic Accountant. Donald R. Cresseywas the first criminologist/sociologist that came up with the term fraud triangle. While working on his thesis he did research on white-collar crime. The Fraud triangle isdesigned as a framework to explain reasons why employees may commit workplace fraud. The Fraud triangle has three concepts, each concept explains why the employee may commit fraud, though not a justification, but rather, a way to understand the triggers that may cause the employee to commit fraud.