Fraud can be perpetrated by an individual within an organization or external to the organization.
The Fraud Triangle, which embodies principles that early criminologists Donald R. Cressey and Edwin Sutherland developed, helps fraud examiners understand why individuals commit fraud. The Fraud Triangle has stood the test of time and provides a valid framework for much of what fraud examiners The new fraud triangle model.
See Iconic Fraud Triangle enduresby W. My employment positions have always been in support of — or on the same team as — senior management. During this time, top-level executives I worked with displayed nearly universally similar behaviors.
These behaviors included lying, cheating, stealing, improper use of position to get around rules, dealing with people based on superior position or influence rather than performance, etc.
In this evolved Fraud Triangle, the possibly fraudulent executive stands alone at the center as the great "I" and is surrounded by three points: Executives want money, position, title, authority, perks, services, etc.
Executives feel as though they deserve money, position, title, authority, perks, services, etc. An assumption of the Executive Fraud Triangle is that an executive has the power and authority deliberate or not to act as he wants — to behave poorly, make bad decisions or commit outright fraud.
Using this authority, the executive can: Spend company money on frivolous items that have no business purpose.
Hire friends or family and pay them large salaries. Make unfair voting decisions. Hide spending in financial statements using improper reporting. Suspend independent quote requirements. Give himself large bonuses. Eliminate any voices of dissent. The executive is the top of the authority pile; he usually goes unchallenged or simply removes those that dare to question.
Some behaviors are fraudulent. Others are an abuse of power.
Misguided executives will lie or will cover up their behavior with lies. Others might simply be ignorant and arrogant. See the graphic below. The executive wants for more and so will use his position and related authority to get it.
The CEO hid the fraud by leaving this "negotiation" out of the meeting minutes and by burying the bonus in "Payroll Other" on the financial statements instead of "Bonus Expense. Take the case of a CEO who felt he was smarter than the rest. He perpetrated a scheme in which he talked his company into giving him a piece of construction equipment for his personal farm.
He never reported the value to the IRS and he improperly coded the value for reporting purposes. Did anyone push back? Yes, but they were subsequently fired. Entitlement The last leg of the Executive Fraud Triangle is entitlement.
Executives feel they deserve anything they could possibly want — money, fame, a bonus, a football-sized office, a gorgeous assistant.
They should get these things because they "deserve" them. This level of selfishness can lead to all sorts of slimy decisions and behavior. For example, a CEO and CFO duo felt they each deserved a large office, private bathrooms, marble hallways and private glass elevators.
On the first offense, the corporate controller brought it up to the CFO, and each of six times thereafter, but the CFO took the easy way out and silenced the voice of dissent. The controller was subsequently fired. However, the Executive Fraud Triangle delineates additional factors that are unique to highest management.
Having witnessed much bad behavior and no punishment for it, I believe true fraud prevention comes with real punishment for crimes committed. As long as executives are driven by supreme selfishness, and if they act upon feelings of greed, pride or entitlement, fraudulent behavior will remain.
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Looking for CORTINA Triangle Warning Kit (1EKU3)? Grainger's got your back. Price:$ Easy ordering & convenient delivery. Log-in or register for your srmvision.com: $ Mar 01, · The Fraud Triangle is a model developed by Dr.
Donald Cressey, a criminologist whose research focused on fraudsters. According to Dr. Cressey, there .