What model explains the three major reasons people commit fraud?

The Fraud Triangle is a well-established model that outlines three key elements that contribute to the occurrence of fraud: pressure, opportunity, and rationalization. This model serves as a framework that helps to understand why individuals may choose to commit fraudulent acts.

The first element, pressure, refers to the motivations or incentives that lead individuals to commit fraud, such as financial difficulties, unrealistic performance expectations, or personal problems. The second element, opportunity, highlights the circumstances that make fraud possible, which may arise from weak internal controls, lack of oversight, or the ability to bypass security measures. Lastly, rationalization involves the mental process where individuals justify their fraudulent behavior to themselves, convincing themselves that their actions are acceptable or that they won't harm anyone.

Understanding the Fraud Triangle is essential for organizations in identifying and mitigating risks associated with fraud. By addressing each element—creating a culture that reduces pressure, implementing strong controls to close off opportunities, and fostering ethical standards to counter rationalization—businesses can significantly decrease the likelihood of fraudulent behaviors.

In contrast, the other options—Financial Stability Model, Opportunity Theory, and Rationality Principle—do not encapsulate the comprehensive framework established by the Fraud Triangle to understand fraud propensity in individuals. While they may cover aspects of behavior related to fraud