Why People Commit Fraud - Essay Sample

Introduction

People commit fraud dues for some reasons. One of the reason is due to the fact of tunnel vision. This includes individuals setting goals and achieving goals that are important in their life. The problem with this is due to the idea that the setting of the goals and striving to achieve them can be the reason why they can fail to realize that they are creating pressure in themselves that can lead to fraudulent acts as they perform their daily activities. They end up compromising the ethical concerns that have been put in place by the law of nature. Another thing that can make people engage in fraudulent behavior is on the urge of establishing influential names. When individuals what to go a higher level in the society to be respected and be given honor, they might be tempted to try all means, to establish influential names. By use of the questionable practices can make individuals appear as if they are acceptable in what they are doing even though it might be wrong.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

The Fraud Triangle

There is some reason that makes people commit fraud. Fraud triangle can be used as a model for explaining why an individual will cause someone to commit occupational fraud. Fraud triangle originated from a hypothesis that was put forward by Donald Crossey. The hypothesis stated that individuals could violate trust at the moment they realize they are facing a financial problem, that cannot be shared with their colleagues. They believe that individuals have is that they can get the solution for their problem by secretly violating their position of financial trust. The individuals are capable of applying their conduct in the situation in a verbal form which assists them in adjusting their conceptions they have as trusted people with their conceptions of themselves as users of the entrusted funds or property. Donald Crossey identified that the Fraud Triangle is made up of 3 components that are the result of fraudulent behavior. The three components are an opportunity, pressure, and rationalization.

Element of Pressure

In respect to the component of pressure, Donald identified that it is the first leg of the fraud triangle. He explained that pressure is the first thing that pushes individuals to indulge in the in fraud. The pressure comes from the situation where the individual has some form of a financial problem and is looking for ways that can help in getting funds to come out of the financial problem. It becomes critical when the individual is not in the position of getting the solution of the financial problem by the approach of using legitimate methods (Murphy & Dacin, 2011). What follows is the individual reaching a point where one is very ready to commit an illegal act, to get funds that are the solution for the problem at hand. It is worth noting that the financial problem can be professional or in other cases, it can be personal. An excellent example of financial problems that can make an individual engage in fraudulent acts includes, having a desire for status symbols such as a good car or a bigger house. Another good example is when it is below the productivity level at work. One will do whatever possible even if it's terrible, to meet the required productivity level. Other examples include being an addict to drugs or even gambling.

Pressure is highly related to the motivation that makes one commit unethical behavior. The scholar pointed out that a fraud perpetrator is characterized pressure that pushes them to commit the unethical acts. The main argument here is that when an individual has a belief that has pressure, even though it could result in small levels, then there is a high possibility that they will end up in committing fraud. It is also worth noting that perceived pressure has a potential resulting in different situations that include non-sharable financial need. In addition to this, it has been identified that pressure has much effect on the motivation of employees, and it is the one that has been considered as the most common type of pressure. As per reports on fraudulent cases, it was found out that 95 percent of these cases, is as a result of people facing financial problems that help in building up of the fraudulent behaviors. This is the main reason it has been concluded that pressure is a significant factor that influences people in committing fraud (Stowell, Sinclair,Johanson,Pacini, & Kearns, 2017). Other types of pressure that characterizes include, employment pressures, personal pressure, as well as the external pressure. Even though the factor of pressure is the main reason why people commit fraud, it is worth noting that it does not mean it is a must for a person with pressure should involve in fraudulent activities.

The pressure that is created in the individuals as an effect of setting goals can be positive or negative. It is worth noting that the moment when there is a possibility of achieving efficiency, creativity as well as competitiveness, the pressure created is positive. On the other hand, when there are no expectations that the goals will be achievable, there is a high possibility that the pressure created in the individual is negative (Wilkins,Acuff, & Hermanson. 2012). In such a situation, the individual is frustrated, and high chances of misconduct are very high. When the mitigation measures fail to affect, then pressure becomes imbalanced, and there is a high possibility of it becoming destructive. The individuals indulge in questionable activities whose results is fraud.

The Element of Opportunity

Opportunity is the second component of the Fraud Triangle. It is created using having faulty control of the system that helps an individual to commit fraud. Accounting professional refer to it as internal control weakness. The argument here is that individuals will always put efforts into getting the best of the opportunities that come on their way. The similarity that exists in between opportunity and pressure is on the idea that it is not a must for them to be real. The fact is that when individuals realize that there are little chances of being caught in, the higher the chances such individuals will take part in fraudulent activities. The various factors that contribute for an individual to involve in fraudulent activity include the employer being unaware, failure of the check being made on the employees, and the belief that no one will care when something terrible has taken place.

The main argument concerning opportunity is that it is caused by the use of adequate controls, improper segregation of duties, as well as the failure of providing appropriate supervision to the activities that are being undertaken by an individual. It is these bases that opportunities show up for the people to find themselves in fraudulent actions. On the other workers who a long tenure with the organization, are the very people who have been identified to be in the high levels of taking part in the fraudulent behaviors. The reasoning and the fact behind this are that such workers are well conversant with the internal controls of the organizations and are in the position of pinpointing the strengths and the weakness that exists in the controls employed in the organization.

The Eement of Rationalization

The fact is that most people who engage in fraudulent activities have no criminal records, and in this way, they do not think that they are engaging in bad behavior. The thinking they have is that they are characterized by honesty who had no will of engaging in the fraud. The implication is that people take part in fraudulent activities due to the fact they find themselves in such circumstances that they think they are justified.

Conclusion

In conclusion, Fraud Triangle theory has three main components that explain why people engage in fraudulent behaviors. The three elements are the element of pressure, opportunity ad rationalization. It has been identified that the element is the main factor that is the reason why people engage in fraud. Negative pressure is the one that forces people to engage in fraudulent behavior and not the positive pressure.

References

Murphy, P. R., & Dacin, M. T. (2011). Psychological pathways to fraud: Understanding and preventing fraud in organizations. Journal of business ethics, 101(4), 601-618.

Stowell, N. F., Sinclair, D., Johanson, E., Pacini, C., & Kearns, G. (2017). Wills, Asset Protection Trusts, and Financial Crime. Journal of Forensic & Investigative Accounting, 9(1).

Wilkins, A., W. Acuff, and D. Hermanson. 2012. Understanding a Ponzi scheme. Journal of Forensic and Investigative Accounting 4(1): 1-19.