The Fraud Triangle 2 CPE

The fraud triangle is often referred to when studying aspects of white collar crime and fraudulent acts. There are several types of fraud, yet they all share the same fraud triangle. Two individuals who deserve the most credit for the fraud triangle theory are early criminology researchers Edwin Sutherland and Donald Cressey. Sutherland and Cressey, both criminologists, were professors and researchers teaching criminology in sociology departments.  

Sutherland developed the "differential association theory” of why people commit crimes. He believed criminal behavior is learned and not inherited.

The person most associated with developing the fraud triangle was Donald Cressey.  Cressey was a co-author with and student of Edwin Sutherland.   He defined the fraud problem as a "violation of a position of financial trust that the person originally took in good faith.”

Although Cressey and Sutherland were linked to the concepts embedded in the fraud triangle, neither referred to the term “fraud triangle” or the visual depiction.

Understanding fraud and why it occurs requires a deep understanding of the philosophy and concepts behind each leg of the fraud triangle: pressure, opportunity and rationalization. Organizations can take real, visible action to reduce the risk of opportunity by implementing better internal controls and processes. Individuals' moral framework and corporate culture, included in realization and pressure, are far more difficult to affect explicitly and directly. By understanding these concepts and the profile of the typical white collar fraudster, individuals can begin taking proactive steps towards fraud mitigation.

Note: Information within this course comes from readily available public domain documents and is utilized by the trainer as a supplement for relaying the course content.

Prerequisites

No Advanced Preparation or Prerequisites are needed for this course. 

Learning Objective

• Learn and understand definition of fraud, fraud identification, detection and fraud prevention.
• Explore the theories of Edward Sutherland and Donald Cressey.
• Recognize symptoms of the fraud triangle.
• Identify how to address symptoms of pressure, opportunity and rationalization.
• Recognize how the three sides of the fraud triangle work together.
• Explore types of frauds and how they are committed.
• Evaluate the profile of the fraudster.

Last updated/reviewed: March 17, 2024