Arizona State University (ASU) ACC231 Uses of Accounting Information I Exam 2 Practice

The Fraud Triangle is a well-established model used to understand the three key elements that facilitate fraudulent behavior: perceived pressure, rationalization, and perceived opportunity.

Perceived pressure refers to the motivation or incentive that drives an individual to commit fraud. This pressure might come from various sources, such as financial difficulties, the desire to meet unrealistic performance expectations, or personal issues.

Rationalization is the mental process by which an individual justifies their fraudulent actions. This can involve convincing themselves that the act is permissible or that they are entitled to engage in such behavior due to circumstances beyond their control.

Perceived opportunity is the individual's assessment of their ability to commit fraud without being caught. This can be influenced by the environment, such as weak internal controls, lack of oversight, or a culture that does not emphasize ethical behavior.

Understanding these three components helps organizations identify potential risks for fraud and implement strategies to mitigate them effectively.