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 the case you presented involving the collusion between the IT employee and the owner of the service provider, the **fraud triangle** offers the best possible explanation for their actions. The fraud triangle consists of three elements: opportunity, motivation, and rationalization. Let’s break down how each of these elements applies to this situation:
1. **Opportunity**: The IT employee has significant control over business operations, which includes access to financial and nonfinancial information. This level of control creates a unique opportunity for committing fraud without being easily detected, especially in a small business with relatively few employees and weak internal controls.
2. **Motivation**: The motivation for the collusion may stem from personal financial gain. The evidence suggesting that the IT employee and the service provider’s owner are splitting the proceeds indicates a financial incentive, which can be a powerful motivating factor. This motivation could be driven by personal circumstances, such as financial difficulties or a desire to attain a certain lifestyle.
3. **Rationalization**: To justify their actions, the IT employee and the service provider's owner might rationalize the fraud in various ways—perhaps believing that they are entitled to the money, viewing their actions as harmless, or convincing themselves that others would do the same in their position.
In summary, the **fraud triangle** effectively captures how the combination of opportunity (control over operations and lack of oversight), motivation (financial gain), and rationalization (justifying unethical behavior) leads to the collusion and fraudulent activities observed in this scenario.
In contrast, the **fraud scale** and the M.I.C.E. acronym (Money, Integrity, Coercion, and Ego) are useful frameworks but do not provide as comprehensive an explanation as the fraud triangle in this specific case. The fraud triangle clearly lays out the relationship between the circumstances and behaviors that lead to the fraud committed by the colluding parties.
1. **Opportunity**: The IT employee has significant control over business operations, which includes access to financial and nonfinancial information. This level of control creates a unique opportunity for committing fraud without being easily detected, especially in a small business with relatively few employees and weak internal controls.
2. **Motivation**: The motivation for the collusion may stem from personal financial gain. The evidence suggesting that the IT employee and the service provider’s owner are splitting the proceeds indicates a financial incentive, which can be a powerful motivating factor. This motivation could be driven by personal circumstances, such as financial difficulties or a desire to attain a certain lifestyle.
3. **Rationalization**: To justify their actions, the IT employee and the service provider's owner might rationalize the fraud in various ways—perhaps believing that they are entitled to the money, viewing their actions as harmless, or convincing themselves that others would do the same in their position.
In summary, the **fraud triangle** effectively captures how the combination of opportunity (control over operations and lack of oversight), motivation (financial gain), and rationalization (justifying unethical behavior) leads to the collusion and fraudulent activities observed in this scenario.
In contrast, the **fraud scale** and the M.I.C.E. acronym (Money, Integrity, Coercion, and Ego) are useful frameworks but do not provide as comprehensive an explanation as the fraud triangle in this specific case. The fraud triangle clearly lays out the relationship between the circumstances and behaviors that lead to the fraud committed by the colluding parties.