Question
A small business is contracting for services where evidence indicates that the services are not needed nor performed.
The small business has relatively few employees and few internal controls.
An information technology employee has control over aspects of business operations of a small business, including financial and nonfinancial information.
Evidence suggests that the conversion is indirectly tied to the IT employee and the owner of the service provider who appear to be splitting the proceeds proportionally.
Evidence eliminates all other employees except the IT employee.
Which fraud model, the fraud triangle, the fraud scale, or the acronym M.I.C.E., offers the best possible explanation for the actions of this collusive fraud team: the IT employee and owner of the service provider? Why?
The small business has relatively few employees and few internal controls.
An information technology employee has control over aspects of business operations of a small business, including financial and nonfinancial information.
Evidence suggests that the conversion is indirectly tied to the IT employee and the owner of the service provider who appear to be splitting the proceeds proportionally.
Evidence eliminates all other employees except the IT employee.
Which fraud model, the fraud triangle, the fraud scale, or the acronym M.I.C.E., offers the best possible explanation for the actions of this collusive fraud team: the IT employee and owner of the service provider? Why?
Answers
GPT-4o mini
In this scenario, the best model to explain the actions of the collusive fraud team—specifically the IT employee and the owner of the service provider—would be the **fraud triangle**. The fraud triangle is composed of three key elements: **pressure, opportunity, and rationalization**.
1. **Pressure**: The IT employee may be under financial pressure (personal debts, lifestyle choices, etc.) that drives them to commit fraud. Similarly, the owner of the service provider might also face business pressures that incentivize unethical behavior, such as the need for cash flow or business survival.
2. **Opportunity**: This is a significant factor in this case as the IT employee has control over business operations, including financial and non-financial information. The lack of internal controls in the small business further increases the opportunity for committing fraud without detection. The collusion between the IT employee and the service provider owner enhances this opportunity since they can work together to cover their tracks and manipulate records.
3. **Rationalization**: Both individuals may rationalize their actions as being acceptable or justified. The IT employee might believe they are entitled to extra income due to their unique role or contributions, while the service provider may rationalize that this arrangement helps both parties survive financially.
While other models such as the **fraud scale** or **M.I.C.E.** (Material Gain, Influence, Coercion, and Entitlement) have their merits, they do not encapsulate the dynamics of the fraud quite as effectively as the fraud triangle. The fraud triangle specifically highlights how pressure and opportunity create an environment conducive to fraud, while rationalization provides a psychological defense for why the perpetrators justify their actions.
Thus, in analyzing the collusive behavior of the IT employee and the service provider, the fraud triangle is the most comprehensive model for understanding their motivations and actions in this fraudulent scenario.
1. **Pressure**: The IT employee may be under financial pressure (personal debts, lifestyle choices, etc.) that drives them to commit fraud. Similarly, the owner of the service provider might also face business pressures that incentivize unethical behavior, such as the need for cash flow or business survival.
2. **Opportunity**: This is a significant factor in this case as the IT employee has control over business operations, including financial and non-financial information. The lack of internal controls in the small business further increases the opportunity for committing fraud without detection. The collusion between the IT employee and the service provider owner enhances this opportunity since they can work together to cover their tracks and manipulate records.
3. **Rationalization**: Both individuals may rationalize their actions as being acceptable or justified. The IT employee might believe they are entitled to extra income due to their unique role or contributions, while the service provider may rationalize that this arrangement helps both parties survive financially.
While other models such as the **fraud scale** or **M.I.C.E.** (Material Gain, Influence, Coercion, and Entitlement) have their merits, they do not encapsulate the dynamics of the fraud quite as effectively as the fraud triangle. The fraud triangle specifically highlights how pressure and opportunity create an environment conducive to fraud, while rationalization provides a psychological defense for why the perpetrators justify their actions.
Thus, in analyzing the collusive behavior of the IT employee and the service provider, the fraud triangle is the most comprehensive model for understanding their motivations and actions in this fraudulent scenario.