In short
The fraud triangle describes three conditions usually present when fraud occurs: an incentive or pressure, an opportunity, and an attitude or rationalization that allows someone to commit it.
Key takeaways
- Auditors use it to identify fraud risk factors during risk assessment.
- Opportunity is the condition that internal controls most directly reduce.
- It applies to both fraudulent financial reporting and misappropriation of assets.
Example
Bonuses tied to earnings targets (pressure), a weak audit committee (opportunity) and a history of ignoring control recommendations (attitude).
Where it's tested
AUD: Fraud Risk — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which fraud-related presumption can NEVER be rebutted by the auditor?