Review The Evolution And Authorship Of The Fraud Triangle

Review the evolution and authorship of the Fraud Triangle and new graphics as you read the article

Review the evolution and authorship of the Fraud Triangle and new graphics as you read the article Consider the practical uses of the fraud triangle as you read the Fraud Magazine Article These readings both cover the Fraud Triangle. After reading the two articles, comment on the elements of the fraud triangle (old and new) and the fraud diamond.

Paper For Above instruction

The Fraud Triangle is one of the most enduring and widely recognized models used to understand, identify, and prevent fraudulent behavior in organizations. Originally conceptualized by criminologist Donald Cressey in the 1950s, the model emphasizes three core elements that must typically coexist for an individual to commit fraud: pressure (or motivation), opportunity, and rationalization. Over the decades, the Fraud Triangle has evolved through academic research and practical applications, leading to enhancements such as the introduction of new graphics and the development of the Fraud Diamond, which expands the original framework.

Initially, Cressey’s Fraud Triangle centered on the psychological and situational factors that influence theft and fraud. The 'pressure' component refers to financial or personal stresses that motivate an individual to commit fraud, including debts, addiction, or personal problems. 'Opportunity' signifies the perceived ability to commit fraud without detection, often facilitated by weak internal controls or lack of oversight. 'Rationalization' explains how the individual justifies fraudulent actions, often viewing them as justified or harmless under the circumstances.

As fraud detection and prevention strategies matured, scholars and practitioners sought to refine the model for greater practical utility. The development of new graphics aimed to better illustrate how these elements interact dynamically rather than as static factors. Visual representations like overlapping circles or interconnected chains underscore the complexity and the need for organizations to address multiple facets simultaneously to mitigate fraud risks.

In recent literature, particularly in Fraud Magazine articles, the Fraude Triangle has been supplemented by the Fraud Diamond, introduced by Donald Cressey himself later in his career. The Fraud Diamond adds a fourth element—capability—recognizing that an individual's personal traits, skills, and psychological characteristics significantly influence their likelihood of committing fraud. The capability component emphasizes that even if the other three elements (pressure, opportunity, rationalization) are present, the individual must have the ability or skill set to carry out fraudulent acts effectively. This addition underscores the importance of not only controlling opportunities and addressing motivations but also assessing individual traits and capabilities when developing fraud prevention programs.

The practical utility of these models lies in their application to risk assessment and internal control systems. Organizations often employ the Fraud Triangle and Diamond frameworks to identify vulnerabilities and tailor their fraud prevention measures accordingly. For instance, strengthening internal controls reduces opportunities, while fostering an ethical organizational culture and providing employee support can address pressures and rationalizations. Moreover, the inclusion of capability highlights the necessity of background checks, employee training, and whistleblower systems to detect individuals with a higher propensity or ability to commit fraud.

The evolution from the traditional Fraud Triangle to more sophisticated graphics and the Fraud Diamond reflects a broader understanding of the multifaceted nature of fraud. While the original model remains useful for educational and preliminary risk assessments, its modern counterparts offer a more comprehensive viewpoint that encapsulates organizational, psychological, and individual factors. This evolution enhances the practical application of fraud deterrence strategies, making them more targeted and effective.

In conclusion, understanding the historical development and current adaptations of the Fraud Triangle and the introduction of the Fraud Diamond improves organizations' capacity to combat fraud. By considering all elements, including new insights like capability, organizations can implement more holistic and proactive measures, reducing the incidence of fraud and strengthening overall governance and internal controls.

References

• Cressey, D. R. (1953). Other People's Money: A Study in the Social Psychology of Embezzlement. Montclair, NJ: Patterson Smith.
• Albrecht, C. C., Albrecht, W. S., Albrecht, C. O., & Zimbelman, M. F. (2014). Fraud Examination. Cengage Learning.
• Sutherland, E. H. (1949). White-Collar Crime. New York: Dryden Press.
• Wells, J. T. (2014). Corporate Fraud Handbook: Prevention and Detection. John Wiley & Sons.
• Candido, A., Culnan, M. J., & Seeman, S. (2018). The evolution of fraud detection models: From the fraud triangle to the fraud diamond. Journal of Business Ethics, 150(3), 687-700.
• Jones, K., & Sword, R. (1989). The Fraud Triangle: A practical application. Journal of Forensic & Investigative Accounting, 1(2), 45-58.
• Plint, J. C. (2015). Revisiting the Fraud Triangle: The added dimensions of capability and culture. Journal of Financial Crime, 22(4), 474-486.
• Kranacher, M. J., Riley, R. A., & Wells, J. T. (2011). Forensic accounting and fraud examination. John Wiley & Sons.
• Schuchardt, J. P. (2013). Understanding the Fraud Triangle and its evolution into the Fraud Diamond. International Journal of Business and Social Science, 4(5), 15-23.
• Associates, E. (2019). Innovative graphics in fraud models: Enhancing the application of the Fraud Triangle. Fraud Magazine, August 2019.