A-List Accounting, LLC
850-807-0355
info@alistaccounting.com
  • Home
  • Services
    • Accounting Services
    • Business Consulting Solutions
    • What Is Outsourcing?
    • Bookkeeping
    • Payroll
    • Cloud Accounting
    • Tax Preparation and Planning
    • Tax Resolution
  • QuickBooks and Xero Consulting
    • Consulting for QuickBooks®
    • Training for QuickBooks®
    • QuickBooks Products
    • Xero Cloud Accounting
    • Xero Training
  • Industries
    • Services
    • Construction
    • Medical and Health Care
    • Real Estate
    • Non Profit
    • Retail
    • Restaurant
    • Manufacturing
    • Wholesalers and Distributors
    • eCommerce
  • Testimonials
    • Testimonials
    • Post a Review
  • Resources
  • Blog
  • About us
  • Career Opportunities
  • Contact
  • Home
  • Services
    • Accounting Services
    • Business Consulting Solutions
    • What Is Outsourcing?
    • Bookkeeping
    • Payroll
    • Cloud Accounting
    • Tax Preparation and Planning
    • Tax Resolution
  • QuickBooks and Xero Consulting
    • Consulting for QuickBooks®
    • Training for QuickBooks®
    • QuickBooks Products
    • Xero Cloud Accounting
    • Xero Training
  • Industries
    • Services
    • Construction
    • Medical and Health Care
    • Real Estate
    • Non Profit
    • Retail
    • Restaurant
    • Manufacturing
    • Wholesalers and Distributors
    • eCommerce
  • Testimonials
    • Testimonials
    • Post a Review
  • Resources
  • Blog
  • About us
  • Career Opportunities
  • Contact

The Triangle of Fraud Risk

February 4, 2016 In Business Development, Business Tips, Management Tips

A 2014 Global Fraud Study conducted by the Association of Certified Fraud Examiners (ACFE) estimates that the average business loses five percent of their revenues to fraud.  The global total of fraud losses is $3.7 trillion.  The median fraud case goes 18 months before detection and results in a $145,000 loss.  How can you avoid being a fraud victim?

The first step is to become more aware of the conditions that make fraud possible.  The fraud triangle is a model that describes three components that need to be present in order for fraud to occur:

  1. Motivation (or Need)
  2. Rationalization
  3. Opportunity

When fewer than three legs of the triangle are present, we can deter fraud.  When all three are present, fraud could occur.

Motivation

Financial pressure at home is an example of when motivation to commit fraud is present.  The fraud perpetrator finds themselves in need of large amounts of cash due to any number of reasons:  poor investments, gambling, a flamboyant lifestyle, need for health care funds, family requirements, or social pressure.  In short, the person needs money and lots of it fast.

Rationalization

The person who commits fraud rationalizes the act in their minds:

  • I’m too smart to get caught.
  • I’ll put it back when my luck changes.
  • The big company won’t miss it.
  • I don’t like the person I’m stealing from.
  • I’m entitled to it.

At some point in the process, the person who commits fraud loses their sense of right and wrong and their fear of any consequences.

Opportunity

Here’s where you as a business owner come in.  If there’s a leak in your control processes, then you have created an opportunity for fraud to occur.  People who handle cash, signatory authority on a bank account, or financial records with poor oversight could notice that there is an opportunity for fraud to occur with the ability to cover the act up for some time.

Seventy-seven percent of all frauds occur in one of these departments:  accounting, operations, sales, executive/upper management, customer service, purchasing and finance. The banking and financial services, government and public administration, and manufacturing industries are at the highest risk for fraud cases. (Source: ACFE)

Prevention

Once you understand a little about fraud, prevention is the next step.   To some degree, all three points on the triangle can be controlled; however, most fraud prevention programs focus on the third area the most:  Opportunity.  When you can shut down the opportunity for fraud, then you’ve gone a long way to prevent it.

While we hope fraud never happens to you, it makes good sense to take preventative steps to avoid it.  Please give us a call if we can help you in any way.

Leave your comment Cancel Reply

(will not be shared)

Monthly Archives

Categories

  • Accounting (56)
  • Accounting Software (1)
  • Blog (10)
  • Bookkeeping (1)
  • Bookkeeping Tips (22)
  • Business Development (61)
  • Business Growth (6)
  • Business Tips (195)
  • Cloud Accounting (2)
  • Cool Tech Tools (21)
  • Cost-Saving Tips (1)
  • Cost-Savings Tips (16)
  • Customer Service (1)
  • Customer Service Tips (19)
  • Decision-Making Tips (7)
  • Expense Reduction Tips (10)
  • Finance Management (1)
  • Management Tips (50)
  • Marketing Tips (1)
  • Money Management (1)
  • Payroll Tips (6)
  • Personal Development (5)
  • Productivity Tips (1)
  • Profitability Tips (31)
  • Profits (1)
  • QuickBooks Help (2)
  • QuickBooks Software (2)
  • QuickBooks Training (1)
  • Small Business (1)
  • Social Media (5)
  • Tax (5)
  • Technology (1)
  • Time Management Tips (20)
  • Uncategorized (2)

Sitemap

  • Home
  • Accounting Services
  • QuickBooks and Xero Consulting
  • Industries
  • Testimonials
  • Blog
  • About Us
  • Career Opportunities
  • Contact

Contact Us

Consulting & Training for QuickBooks, Consulting & Training for Xero, Bookkeeping, Payroll, Taxes and CFO/Controller services

A-List Accounting, LLC

PO Box 9517, Panama City Beach, FL 32417

850-807-0355 | info@alistaccounting.com

Client Login

Client Portal Login


Intuit, QuickBooks, and QuickBooks ProAdvisor are registered trademarks of Intuit Inc. Used with permission under the QuickBooks ProAdvisor Agreement.

Copyright A-List Accounting, LLC 2022 | Professional Site Design by Accelerator Websites | Powered By ThriveFuel