Question

Fernando’s Fraud Triangle is a retail establishment that has been experiencing lower revenues in the last six months, even though sales are up to 21.1 %.

Fernando’s sells whatever products you want to sell and takes cash, credit cards, and checks.

All three categories-cash/checks/credit cards-have remained consistent with no significant increase-while sales are up.

There are three employees and all have access to the register and can override refunds and any other items that need to be charged back.

I have narrowed it down to three employees for you.

You have been called in as the Fraud Examiner to see who has their fingers in the till.

Mitch:

47 Years old; 14.2 years with the company/full time employee

Recently divorced/ pays child support for two kids

Wages are garnished by the courts for payment

Drives a three year old Jag-u-Ar

Just bought a new home

Makes $88,282 a year

Loves to dress in style

Loves the night life

Crystal:

31 Years old; 10.8 years with the company/full time employee

Married/mother of two children

Husband has a full time job

Makes $72,262 a year

Drives a four year old Volvo

Recently bought a new home

Loves to dress in style

Loves the night life

John:      

21 years old; 5.3 years with the company/part time employee

College student/accounting

Just bought a four year old Hyundai Santa Fe

Lives with his parents

Pays for school

Makes $38,282 a year, part time

Single

Loves to party and dress nice

Applying the fraud triangle, who has been stealing the funds?

Answer 1

The three elements of the Fraud Triangle are: Opportunity, Pressure (also known as incentive or motivation) and Rationalization (sometimes called justification or attitude). For fraud to occur, all three elements must be present.

Applying the fraud triangle, we conclude that Mitch has been stealing the funds.

1)Mitch

Mitch has access to the register and can override refunds and any other items that need to be charged back. Thus, he has the opportunity to manipulate accounts.

Mitch has been recently divorced and pays child support for 2 kids. His wages have been garnished by the courts for payment. Thus, he faces the pressure.

Despite being a full time employeee and with the company for 14.2 years, he makes only $88,282 a year compared to John who's a part time employee since 5.3 years and makes $38,282, which is 43.36% of what Mitch makes. Hence, Mitch feels that he is not paid what he deserves and hence, rationalizes the fraud committed by him.

2)Crystal

Crystal and her husband both have a full time job, hence she doesn't face any pressure. She has not committed the fraud.

3)John

John receives a decent sum compared to the others. He lives with his parents and has to only bear cost of school. There is not much pressure or rationalization.

Hence, Mitch has committed the fraud and is stealing the funds.