Enron-Fraud-Triangle-Agency-Theory.docx - The Fraud... This preview shows page 1 - 2 out of 2 pages. The Fraud Triangle model can be used to analyze the Enron scandal. It consists of three elements that must be present in order for a person to commit fraud. The three components are pressure, opportunity and rationalization.
The 3 Elements 1 Pressure. The pressure is the motivation behind fraud committing, and that can be either personal financial pressure or pressure from superiors. 2 Opportunity. When pressure is present employee looks for an opportunity for committing the fraud. ... 3 Rationalization. It is the last stage in the fraud triangle. ...
What is Fraud Triangle? Fraud Triangle is the concept that explains the reason behind committing fraud by workers at a workplace and consists of three elements that are responsible for the fraud – pressure, rationalization and opportunity.
This preview shows page 1 - 2 out of 2 pages. The Fraud Triangle model can be used to analyze the Enron scandal. It consists of three elements that must be present in order for a person to commit fraud. The three components are pressure, opportunity and rationalization.
An important way to analyze the fraud, waste, and abuse that occurred at Enron is through the fraud triangle. The three parts of the fraud triangle are opportunity, motivation, and rationalization. For Ken Lay, he had the opportunity as founder, CEO, and Chairman of Enron to run the company to his desires.
-Rationalization. The most important element of the fraud triangle. For an employee to commit fraud, the workplace environment must provide opportunities that an employee can exploit. These occur when the workplace lacks sufficient controls to deter and detect fraud.
Investigation of Enron To date, the SEC has uncovered several instances of financial fraud committed by high-ranking executives at Enron. Many of the executives have been charged with wire fraud, money laundering, securities fraud, mail fraud, and conspiracy.
According to the fraud diamond theory, there are four elements that influence a person to commit fraud, namely pressure, opportunity, rationalization and capability (Wolfe and Hermanson, 2004).
The main elements are pressure, opportunity, and rationalization. To prevent fraud, there must be strong internal controls, zero tolerance, and a proper code of ethics, which motivates employees to be ethical.
Which element of the fraud triangle do companies have the greatest ability to eliminate? Opportunity. You just studied 26 terms!
Essentially, the three elements of the Fraud Triangle are: Opportunity, Pressure (also known as incentive or motivation) and Rationalization (sometimes called justification or attitude). For fraud to occur, all three elements must be present.
The Enron scandal was a series of events involving dubious accounting practices that resulted in the bankruptcy of the energy, commodities, and services company Enron Corporation and the dissolution of the accounting firm Arthur Andersen.
Enron's downfall was attributed to its reckless use of derivatives and special purpose entities. By hedging its risks with special purpose entities which it owned, Enron retained the risks associated with the transactions. This arrangement had Enron implementing hedges with itself.
Fourth, a successful fraudster can coerce others to commit or conceal fraud. A person with a very persuasive personality may be able to convince others to go along with a fraud or to simply look the other way.
Fraud Triangle - Opportunity, Incentive, Rationalization.