Fraud Triangle
In his article, “Why Do Trusted People Commit Fraud?” Cressey (1951) contends that the fraud process can be categorized into three stages. They are motivation, opportunity, and rationalization. Motivation is the pressure on an individual to acquire additional finances (Schuchter & Levi, 2016). This pressure may drive an employee to acquire finances illegally and unorthodoxly. The need for money may arise from various circumstances. For instance, the fraudster may have a sick relative and possess an extravagant habit such as gambling. In other cases, the employee may perceive underpayment as opposed to other workers or the workload, motivating him to steal from his employer. The second step, dubbed opportunity, entails the identification of instances when the employee can unsuspectedly take the money. The culprit identifies opportunities that they perceive are most suitable and exhibit less likelihood of being caught. For instance, when the cash drawer is left unlocked at night — or forging the employer’s cheque.
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The last stage, rationalization, pertains to the offender’s justification for his actions. This stage entails defense by the fraudster for his fraudulent actions. For instance, he may state that he took money from the cash drawer as a way of borrowing and would return it later. Also, he may state that the employer underpays him, so the robbery was to compensate him. In Beacon’s case, the fraudulent actions by the management were inspired by greed as they sought to earn additional bonuses. They used the opportunity of misstating the revenue collected from the $ 7 million project to indicate higher net earnings in the financial statements. They might justify their actions as seeking fair compensation; the project would be completed quickly.
References
Schuchter, A., & Levi, M. (2016). The Fraud Triangle Revisited. Security Journal, 29(2), 107-121.
Cressey, D. R. (1986). Why Managers Commit Fraud. Australian & New Zealand Journal Of Criminology, 19(4), 195-209.
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