When you review fraud risk, auditors will often refer to Fraud Triangle. A Fraud Triangle is made up of three factors. The first is the Incentive/Pressure. It is the motive for doing a fraud. One common motive for doing this crime is problems with gambling. The second is Rationalization wherein a person who commits the fraud often rationalizes it by saying that he or she will pay the money back or saying that the funds he or she takes will not be missed.

Third is Opportunity wherein a person who commits fraud sees internal control weakness and believes that nobody notices a missing fund. It will start with a small amount and usually grows bigger.

This kind of fraud is a concept created by Donald Cressey. The creation of the theory required him to interview around 200 convicted embezzlers which he called as ‘trust violators’. He was keenly interested in them since they had joined the workplace without the intention to steal. After his interviews, he concluded that trusted people become trust violators when they see themselves as having financial difficulties which they could not share. With this, Cressey established what is known today as fraud triangle and its three components.