There are many reasons why people commit fraud. In fact, every incident of
fraud usually has its own situation or reasoning behind it. The fraud triangle sheds a
lot of light of the causes of fraud. Opportunity, reasoning, and financial pressure are
the real culprits behind fraud. The causes of fraud are in many cases the fault of
managers for poor internal control procedures. If internal Controls are applied
appropriately there should be virtually zero fraud without detection. Fraud can be
devastating to a company in more ways than one. Fraud can drastically affect the
books that a company shows and could not only cost the company the goods or
inventory or equipment stolen but it can also cause the internal accountants to
overstate the year’s inventory or equipment which will ultimately be more costly on
their tax return. In consequence of fraud, companies in the U.S. lose billions of
dollars per year that is generally unrecoverable. Proper internal controls can save
the company a lot of money every year, just by applying simple rules and
procedures (ex: don’t let the same person who opens the mail deposit the checks).
Ethics play a huge role when it comes to fraud. Ethics is not something you
necessarily learn in college but more so at home growing up. Basic rules apply
(don’t steal, don’t cheat, etc.) when someone isn’t raised around good ethics, that
person is more likely to commit fraud in their adult life. In a perfect world where
anti -fraud tactics such as internal control methods aren’t needed we would
imagine people would do the right thing by not taking what isn’t theirs. However,
there aren’t enough of those people in this world to have that level of trust for
people. Ethics is best defined or simplified by “doing the right thing”.
