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The Three Components to Prevent Fraud - Opportunity, Motivation, and Justification
- Writing language: Korean
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Summarized by durumis AI
- To prevent corporate fraud, it is necessary to understand the theory of the fraud triangle, which consists of three elements: 'opportunity', 'motivation and pressure', and 'justification'.
- To prevent fraud, appropriate countermeasures should be prepared for each element. To eliminate opportunity, it is necessary to strengthen systems such as division of work, mutual checks and balances, and periodic audits.
- To alleviate motivation and pressure, efforts at the company level are needed, such as assigning appropriate workloads, fair performance evaluations, and employee counseling. To prevent justification, it is important to provide ethics education, transparent communication, and a fair corporate culture.
Illegal activities that occur within a company, or fraud, are always a risk factor. To prevent fraud, it is important to understand the causes of its occurrence. Organizational crime researcher Donald Cressey and certified public accountant Steve Albrecht proposed the 'Fraud Triangle' theory, which explains the causes of fraud occurrence as three factors: 'opportunity', 'motivation and pressure', and 'rationalization'.
If any one of these three factors is missing, fraud is unlikely to occur. Therefore, to prevent fraud from happening, these three factors must be eliminated.
First, 'opportunity' means that the environment for fraud is in place. For example, this includes situations where certain tasks or authority are concentrated in one person, making it difficult to check, or situations where internal control systems are weak. To eliminate such situations, measures such as work division, mutual checks, periodic audits, and security reinforcement are needed.
Second, 'motivation and pressure' refers to situational factors that make fraud unavoidable. For example, this includes situations where employees are forced to resort to dishonest methods due to work overload, performance pressure, or financial difficulties. To prevent this, the company needs to make efforts such as assigning appropriate work loads, establishing a fair performance evaluation and compensation system, and providing employee counseling.
Third, 'rationalization' refers to the logic of justification for fraudulent acts. Rationalization such as 'competitors do it too', 'this level is fine', etc. makes fraudulent acts seem justified. To address this, it is necessary to provide ethics education, establish a transparent communication system, and foster a fair corporate culture.
To prevent fraud within a company, multifaceted efforts are needed to eliminate the three factors of opportunity, motivation, and rationalization. It is necessary to make all-round efforts to strengthen internal control systems, operate personnel systems transparently, and establish an ethical management culture. Prevention is the best way to minimize the damage caused by fraud.
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