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Submitted By jessiechai
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Jie Chai (Jessie)
MACC-663-OL1
Paul Zikmund
Due Date: Sep.15th
Individual assignment 2
“The Fraud Triangle is a model for explaining the factors that cause someone to commit occupational fraud”; it is widely used within business companies. It consists of three components that, together, lead to fraudulent behavior. Those three factors that must be present at the same time in order for an ordinary person to commit fraud: pressure, opportunity and rationalization. Michael D. Frenza has mentioned it in his article “Fraud perpetrators usually have a non-sharable pressure, they recognize a perceived opportunity, and then they rationalize their actions”.
It is so important for companies to incorporate the fraud triangle theory in order to reduce the risk of misconduct within their organization. A company must recognize the common elements in most fraud cases. Once an employee has a pressure, they must find an opportunity to remedy their problem. There are a lot of opportunities within the companies for them. For example, the weak internal controls that fail to prevent, lack of management by top managers, irregular of auditors. When they take the advantage of those opportunities, they rationalize their actions. Most of them don’t realize they are
Criminals. They all have one common sense that they will pay back money later to make up the economic losses. It seems like not a big deal for them.
The pressure component of the Fraud Triangle is not easily controlled by companies. Therefore, it is important for companies to recognize pressures facing employees carefully. Employees are humans not machines; top managers should learn how to communicate with them from heart to heart. Knowing your employees is a vital subject. Before the company hire new employees, they should make sure they double-check their background and performance. They should hire honest and modest

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