Question

Why might somebody looking to commit fraud choose to defraud a for profit company instead of a non-profit company? Is it simply a matter of opportunity? Describe on 2 paragraphs with 2 references.

Answer 1

To implement a strong system of internal controls, one must first understand what drives an employee to commit fraud. A common theory used in considering the risk of fraud is the Fraud Risk Triangle, which includes three elements: pressures, opportunities, and rationalizations are defined further below:

• Pressure usually occurs when the executive director or board of directors emphasize to lower level employees that goals must be met, no matter the means. Pressure can also be exerted on an employee from external sources, such as increasing personal debt and the inability to provide for their family based on their salary.
• Opportunity to commit fraud typically arises from not having a proper system of internal controls in place. Internal controls are policies and procedures that help mitigate the risks of fraud and error in an organization. Internal controls typically restrict access and use of assets. They can be as simple as having locks on the doors and as complex as requiring multiple authorizations before funds can be dispersed.
• Rationalization is what an employee says to themselves to make themselves believe that what they are doing is okay. Common rationalizations are “everyone else is doing it” or “it’s only going to happen one time.”

But in non profit comoany there is not so much pressure on employees. On the other hand , non profit entities motive is not to earn profit but to help society so there is less risk of fraud in non profit company.