The fraud triangle consists of 3 factors that are generally present when a fraud occurs: (1) incentive, (2) opportunity, and (3) rationalization. Incentive is a financial need that a person perceives to be unshareable (the person has a gambling debt and is ashamed to ask anyone for money to cover the debt). Opportunity occurs when internal controls are weak or nonexistent (cash has been left laying around). Rationalization is the attitude that it is okay for the person to commit the fraud (the company doesn’t pay me enough money so I deserve this, I’m really just borrowing the money and intend to pay it back, etc.). When a person has incentive, opportunity, and rationalization, there is a high likelihood the person will commit fraud.
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