The Fraud Triangle: What It Is and What You Can Do
What Is The Fraud Triangle?
We wrote about a week ago about a case study where internal fraud was discovered. In the business world, three aspects make up what is known as the Fraud Triangle. The Fraud Triangle consists of three important parts of a person’s life that are known from extensive research to, when combined, lead him or her to commit employee fraud.
PHOTO: The Fraud Triangle consists of Rationalization, Motivation, and Opportunity. Image courtesy of Brickell Homeowners Association
The aspects of the Fraud Triangle are: Motivation, Opportunity, and Rationalization (or Perceived Pressure). A classic example is a sales manager reporting their own numbers (opportunity), whose bonus is based on his or her annual sales (motivation) and who may need the extra money to fix his or her car (rationalization).
How To Minimize Fraud Risk
For this example, by putting someone else in charge of reporting the sales figures, and/or basing the annual bonus on other merit besides the amount of sales, you are minimizing the risk of fraud. This is because of checks and balances. With checks and balances, you minimize the opportunity of fraud as well as the motivation.
Need Help With Fraud Prevention or Detection?
A good business management consultant will make sure that your company has all of the proper checks and balances you need so that you never have to pay the price of fraud. Once these are in place, you will have a self-contained fraud-prevention program that will only need to be updated periodically.
~by Cate Patricolo, Staff Writer, SEO, Keyword, Web Development, and Social Media Specialist, Fisher Business Management
About the Author Barb Fisher
Barb is the CEO of Fisher Bookkeeping, an outsourced bookkeeping consultancy that provides small businesses with a full-service financial department. Her favorite aspect of work is to break down the accounting to meaningful bits, so entrepreneurs can make a powerful difference in their own business. She's also a power lifter (squat: 215, DL: 270).