Questions: What are the three parts of the fraud triangle?

The fraud triangle is a model for explaining the factors that cause someone to commit occupational fraud. It consists of three components:

1. Opportunity: This is the situation that enables fraud to occur. It often arises from weak internal controls, lack of oversight, or the ability to override existing controls. When individuals perceive that they have the chance to commit fraud without being caught, the likelihood of fraudulent activity increases.

2. Pressure (or Incentive): This refers to the motivation or need that drives an individual to commit fraud. It can stem from personal financial problems, unrealistic performance expectations, or pressure to meet financial targets. The pressure can be internal or external, but it creates a compelling reason for the individual to engage in fraudulent behavior.

3. Rationalization: This is the process by which the individual justifies their fraudulent actions. They may convince themselves that their behavior is acceptable, necessary, or that they deserve the benefits gained from the fraud. Rationalization allows individuals to reconcile their actions with their personal values or ethics.

These three elements must be present for fraud to occur, and understanding them can help organizations develop strategies to prevent and detect fraudulent activities.