Fraud Triangle Theory

The Fraud Triangle Theory explains why people commit fraud based on three key factors: Incentive, Opportunity, and Rationalization. 1. **Incentive**: There’s usually a compelling reason, like financial pressure or personal gain, that motivates someone to commit fraud. 2. **Opportunity**: The individual must have the means to commit the fraud, such as weak internal controls or lack of oversight. 3. **Rationalization**: Lastly, they justify their actions to themselves, convincing themselves that what they’re doing is acceptable. Understanding this triangle helps organizations prevent fraud by addressing these three areas.