page_title: Fraud deterrence
section_title: Fraud Triangle
hierarchical_section_title: Fraud deterrence / Fraud Triangle
caption_attribution_description: English: The Fraud Triangle or Compromise Triangle was first proposed in 1951 in the article "Why Do Trusted Persons Commit Fraud? A Social-Psychological Study of Defalcators" in the Journal of Accountancy by Donald Cressey and Edwin Sutherland. This was later researched by a team from KPMG and the term "Fraud Triangle" was coined by one of the researchers, W. Steve Albrecht, Ph.D., CFE, CPA, CIA. This visualization of the Fraud or Compromise Triangle is my own work.
context_page_description: Fraud deterrence has gained public recognition and spotlight since the 2002 inception of the Sarbanes-Oxley Act. Of the many reforms enacted through Sarbanes-Oxley, one major goal was to regain public confidence in the reliability of financial markets in the wake of corporate scandals such as Enron, WorldCom and Waste Management. Section 404 of Sarbanes Oxley mandated that public companies have an independent Audit of internal controls over financial reporting. In essence, the intent of the U.S. Congress in passing the Sarbanes Oxley Act was attempting to proactively deter financial misrepresentation in order to ensure more accurate financial reporting to increase investor confidence. This same concept is applied in the discussion of fraud deterrence.
  Until recently, fraud deterrence has not been specifically identified under one common definition. While it has been discussed by many authoritative sources such as the American Institute of Certified Public Accountants Practice Aid Series, “Fraud Detection in a GAAS Audit: SAS No.
context_section_description: The causal factors that should be removed to deter fraud (as described above) are best described in the Fraud or Compromise Triangle. This idea was first put forward in an article by Donald R. Cressey and Edwin Sutherland. The term was later coined by Steve Albrecht. The Fraud Triangle describes three factors that are present in every situation of fraud:
  Motive (or pressure) – the need for committing fraud (need for money, etc.);
  Rationalization – the mindset of the fraudster that justifies them to commit fraud; and
  Opportunity – the situation that enables fraud to occur (often when internal controls are weak or nonexistent).
caption: The Fraud Triangle
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