Fraud triangle

What is the fraud triangle?

• One of the Top 10 financial frauds in the world.

• Top of a pyramid in Egypt.

• A framework commonly used in auditing to explain the reason behind an individual’s decision to commit fraud.

• A framework used in constructions to build a tower.

What is the definition of "Opportunity" as a component of Fraud Triangle?

• The need the fraudster is trying to satisfy by committing the fraud.

• The fraudster’s ability to commit the fraud

• The need to meet or exceed investor and analyst expectations to ensure stock prices are maintained or increased.

• Poor tone at the top.

What is the fraudster’s ability to justify the fraud in his or her mind in the Fraud Triangle?

• Incentive

• Opportunity

• Pressure

• Rationalization

Under the Fraud Triangle, an example of Incentive is:

• Everybody is doing it

• Bonuses

• Gaps in internal controls

• Low performance of employees

According to the ACFE’s 2022 Report to the Nations:

• Occupational fraud committed by employers against their employees.

• The average organization loses 5% of its annual revenue to fraud each year, causing a median loss of $117,000 before being detected.

• Financial Statement Fraud is the most common type of occupational fraud.

• Asset misappropriation is the costliest type of occupational fraud, with an average loss of $593,000 per case.

According to ACFE 2021 Global Fraud Survey:

• 80% of fraud cases involved the use of Cryptocurrency.

• 42% of frauds were detected by tips, which is nearly 3x as many cases as the next most common method.

• 7% of fraud victim organizations modified their anti-fraud controls following the fraud.

• Organizations without hotlines detect fraud more quickly and have lower losses than organizations with hotlines.