The New Fraud Triangle Model - 3669 Words

Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 3(3): 191-195  © Scholarlink Research Institute Journals, 2012 (ISSN: 2141-7024) jetems.scholarlinkresearch.org Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 3(3):191-195 (ISSN:2141-7024) The New Fraud Triangle Model 1 Rasha Kassem and 2Andrew Higson 1 British University in Egypt Cairo-Suez Desert Road, El Sherouk City 2 School of Business and Economics, Loughborough University, Loughborough, LE11 3TU, UK Corresponding Author: Rasha Kassem ___________________________________________________________________________ Abstract Fraud in corporations is a topic that receives significant and growing attention from regulators,†¦show more content†¦This enables them justify the crime to themselves in a way that makes it acceptable or justifiable. LITERATURE REVIEW Why people commit fraud was first examined by Donald Cressey, a criminologist, in 1950. His research was about what drives people to violate trust. He interviewed 250 criminals over a period of 5 months whose behaviour met two criteria: (1) the person must have accepted a position of trust in good faith, and (2) he must have violated the trust. He found that three factors must be present for a person to violate trust and was able to conclude that: Cressey found that: â€Å"In the interviews, many trust violators expressed the idea that they knew the behaviour to be illegal and wrong at all times and that they merely kidded themselves into thinking that it was not illegal† (page 741). 191 Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 3(3):191-195 (ISSN:2141-7024) Over the years, Cressey’s hypothesis has become well known as â€Å"the fraud triangle† as shown in Figure 1 below. The first side of the fraud triangle represents a pressure or motive to commit the fraudulent act, the second side represents a perceived opportunity, and the third side stands for rationalisation (Wells 2011). Pressure Opportunity Rationalization Figure 1: Fraud Triangle Source: Wells, J. T., 2005. Principles of fraud examination. Hoboken, New York: John Wiley and Sons In 1953, CresseyShow MoreRelatedFraud : The Perfect Fraud Storm1420 Words   |  6 PagesStatement Fraud Option #2 The perfect fraud storm occurred between the years 2000 and 2002 involving two of the largest energy and telecom corporations in the United States: Enron and WorldCom. It was determined that both organizations fraudulently overstated assets, created assets from expenses or overstated revenues, costing investors billions of dollars and resulting in both organizations declaring bankruptcy (Albrecht, Albrecht, Albrecht Zimbelman, 2012). 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