1. Fraud Examination, 3E Chapter 2: Why People Commit Fraud
COPYRIGHT © 2009 South-Western, a part of Cengage Learning.

2. Learning Objectives Know the types of people that commit fraud
Explain why people commit fraud
Describe the Fraud Triangle
Understand how pressure contributes to fraud
Tell why people rationalize
Understand how people are recruited to participate in fraud

3. Type of People That Commit Fraud
What type of people commit fraud?
Anyone!
Not demographically or psychologically differentiated
Have the profile of other honest people

4. The Fraud Triangle
Pressure
Fraud Triangle
Opportunity
Rationalization

5. Pressure Divided into four main groups: Financial pressures Vices
Work-related pressures
Other pressures

6. Pressure Financial Pressures Common Financial Pressures: Greed
Living beyond one’s means
High bills or personal debt
Poor credit
Personal financial losses
Unexpected financial needs

7. Pressure Vice Pressures Worse kind of pressures to commit fraud
Examples include:
Gambling
Drugs
Alcohol
Expensive extramarital relationships

8. Pressure Work-related Pressures “Get even with the employer”
Motivated by these factors:
Getting little recognition
Feeling job dissatisfaction
Fear of losing one’s job
Being overlooked for a promotion
Feeling underpaid

9. Opportunity Six major factors that increase opportunity:
Lack of controls
Inability to judge performance quality
Fail to discipline fraudsters
Lack of access to information
Ignorance, apathy and incapacity
Lack of audit trail

10. Recruitment of Fraudsters
Types of Power
Reward Power
A’s ability to provide benefits to B
Coercive Power
A’s ability to punish B if B does not comply with A
Expert Power
A’s possession of special knowledge or expertise
Legitimate Power
A’s legitimate right to prescribe behavior for B
Referent Power
The extent to which B identifies with A