FraudExamination

Chapter2
Why People Commit Fraud

Albrecht, Albrecht, Albrecht, Zimbelman

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use
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TotheStudent
This chapter covers some of the basic principles of fraud. It begins
with a description of the types of people who perpetrate fraud.

We then discuss why people commit fraud, including the fraud

triangle. Finally, we examine how honest individuals are recruited to
participate in fraud schemes.

By understanding these basic principles, you will see fraud

perpetrators in a different light and begin to understand how a trusted
friend or colleague could, unfortunately, become involved in fraud.

Albrecht, Albrecht, Albrecht, Zimbelman

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
LearningObjectives
Know the types of people that commit fraud.
Explain why people commit fraud.
Describe the fraud triangle.
Explain the fraud scale.
Understand how pressure contributes to fraud.
Understand why people rationalize.
Understand how people are recruited to
participate in fraud schemes. Albrecht, Albrecht, Albrecht, Zimbelman
2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
TypeofPeopleThatCommit
Fraud
Who commits fraud?
Anyone!
Not demographically or psychologically differentiated
Have the profile of other honest people

Albrecht, Albrecht, Albrecht, Zimbelman

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
TheFraudTriangle

Albrecht, Albrecht, Albrecht, Zimbelman

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
TheElementofPressure
Divided into four main groups:
1. Financial pressures
2. Vices
3. Work-related pressures
4. Other pressures

Financial pressure is the most common type of pressure

to commit fraud.

Albrecht, Albrecht, Albrecht, Zimbelman

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
TheElementofPressure
Financial Pressures
Common Financial Pressures:
1. Greed
2. Living beyond ones means
3. High bills or personal debt

4. Poor credit

5. Personal financial losses

6. Unexpected financial needs Albrecht, Albrecht, Albrecht, Zimbelman

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
TheElementofPressure
Vice Pressures

1.Gambling
2.Drugs
3.Alcohol
4.Expensive extramarital relationships

Albrecht, Albrecht, Albrecht, Zimbelman

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
TheElementofPressure
Work-related Pressures
Get even with the employer
Motivated by these factors:
Getting little recognition
Feeling job dissatisfaction
Fear of losing ones job
Being overlooked for a promotion
Feeling underpaid

Albrecht, Albrecht, Albrecht, Zimbelman

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
TheElementofOpportunity
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
Albrecht, Albrecht, Albrecht, Zimbelman

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
FraudRecruitment

Albrecht, Albrecht, Albrecht, Zimbelman

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,