For the beginning of this topic, let’s consider the following situation:

A child takes money from his/her parents without asking permission. So what do we need to discuss here?

Firstly, the parents let the money superficially, facilitating conditions for the child to get the money easily.

Secondly, the parents have researched, discussed with the child, see specifically what the child needs to get money for, what the children wants. Are the child’s needs and wants justifiable??

Thirdly, how the upbringing, education from the family, school and living environment, has affected the child.

The three contents mentioned above, are the introduction to today’s topic, with respect to “The Fraud Triangle”.

Mr. Donald Ray Cressey, an American sociologist and criminologist, has made many research, contributions topics such as: prisoners and prisons, society and criminality, white-collar and black-collar criminals.

Mr. Donald Ray Cressey was born in 1919, and passed in 1987. He came up with a model of the fraud triangle in 1953. His concept of the fraud triangle was well-received at that time. Today, the fraud triangle has become one of the mainstream models used in business and industry management by governments around the world.

The three essential contents of The Fraud Triangle are: Motivation, Opportunity and Rationalization. They are represented by three sides of a triangle.

Motivation shall be understood as, the assigned task of an individual is too high, overloaded, that they have to complete more than their own strength, but still cannot complete. Or an individual has too great a need, too high when their ability does not meet the need for themselves.

Opportunity shall be understood as, in an enterprise, a society, there are no controlling activities, or there is controlling activity, but exercising that control activity, in an ineffective way, will inadvertently create conditions for fraud to occur.

Rationalization shall be understood as, due to personal character or personal morality. They like to do or intentionally commit fraud. Research also shows that attitudes that lead to deceiving come from personal conflict with the group or personal conflict with society..

From the year of 2000 up to now, the model of the fraud triangle has been further researched by many authors, and applied in fields such as:

• Internal control activities, in corporate financial management
• Analyzing and evaluating business activities, in auditing financial statements
• Administration of the state tax system, according to the method of risk management
• Building anti-corruption models in some countries around the world. For example, China has developed more fraud triangle model by the way of establishing operation principles: do not want, do not dare, cannot, in anti-corruption.

A recommendation for enterprises in managing strategic risks related to fraud, is that if a strategic risk has a high probability of occurring, which risk falls into the situation when the enterprise must commit fraud on legality in order to survive and develop. In this situation, Enterprises should no longer measure this strategic risk, but must give up immediately.

For example, in order to mobilize capital, the enterprise must polish its financial statements. In order to make a profit from purshasing and selling stocks, the enterprise must amend their financial statements

For example, a real estate project, a construction project, a natural resource exploitation project, when the legal procedures have not yet been completed, but the investor, has purchased, sold, transferred the project, or used a project to mobilize capital, which is not legal on the stock market.