By Leslie C. Kirsch, CFE, CIA, CISA

Accountants are all familiar with the fraud triangle. You’ve probably seen it or heard it referenced hundreds of times in textbooks, trainings, and professional guides. You may even be able name the sides of the triangle from memory: pressure, opportunity, and rationalization. In all likelihood, most of the classes you’ve taken and articles you’ve read have focused on how to design internal controls to reduce the opportunity part of the triangle. But how much do you really know about the psychology behind the pressure and rationalization legs? In this article, I discuss these often overlooked pieces of the fraud triangle and what they mean for you and your organization.

Pressure: We All Need Different Things

When Dr. Donald Cressey, the inventor of the fraud triangle, studied convicted embezzlers to understand why they had committed fraud, he noticed that they had all felt an “unshareable need” that they knew they could resolve with the money they would get from stealing. The specific need, however, was different for each person he studied. When we talk about pressure, what we really mean is perceived pressure, which is a very subjective thing. One person may feel a lot of pressure because they’re struggling financially and need to pay a medical bill; another may feel the same amount of pressure even though they’re well off because they feel a strong need to project a particular lifestyle.

The piece of pressure that we often overlook is that word “unshareable.” For many fraudsters, they don’t feel that they can ask for help. So, while employers may not be able to directly impact individuals’ perception of pressure, they can provide ways to get help through legitimate means. Employee assistance programs are one option. If you’re unfamiliar with these programs to help employees confidentially resolve personal struggles, the Society for Human Resource Management (SHRM) has an overview.

Rationalization: Losing Sight of What’s Right

Most people who commit fraud took their jobs with good intentions. When someone is caught, they often are relieved because of the stress of maintaining the fraud is so high. They always knew they were violating their morals. As an anti-fraud researcher, I’m asked all the time about why “good people” do bad things. Rationalization is the key. “No one is getting hurt.” “I deserve this.” “Everyone does it.” These are very dangerous phrases to hear when you’re trying to prevent fraud.

There’s a lot that the science of decision-making can teach us here. One of the most important is that when facing an ethical dilemma, the best thing we can do is slow down. A lot of the time, in the moment, we actually lose track of the fact that the choice is one of ethics. Researchers have found that, in the moment, we convince ourselves that it’s a “business decision” and not an ethical one; that lets us engage different decision processes. But even when we have ethics at the forefront, the psychological processes of moral disengagement mean there are many ways that we can convince ourselves that an immoral action is consistent with our values. Slowing the decision process down gives us a chance to spot our error before we make it.

Key Takeaways

At the end of the day, it’s important to recognize that everyone feels pressure sometimes, and everyone sometimes rationalizes bad behavior. So, remember the following:

• Pressure and rationalization may be harder to affect than opportunity, but it’s not impossible.
• Employees are human – they’ll sometimes need help. The more support you give, the less likely they’ll feel “unshareable” pressure.
• It’s important to slow down processes around ethical decisions so we can stop fraud in its tracks. Be aware of judgment biases so you can recognize them.

PICPA’s Technology for Public Accounting Conference is on Jan. 7, 2021. Leslie Kirsch will speak on What Data Readiness and Integrity Actually Mean.

Leslie Kirsch, CFE, CIA, CISA is a forensic accountant and data scientist with more than 15 years of experience designing innovative analytics to detect and investigate fraud. She is a doctoral candidate at the George Washington University studying the relationship between tone at the top and the fraud triangle. You can anonymously participate in her research by taking her survey. 

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