Question

1. Write a short note on techniques of rationalization (neutralization).
2. Explain rationalization with respect to Cressey's fraud theory.

Answer 1

Techniques of neutralization or Rationalization are a theoretical series of methods by which those who commit illegitimate acts temporarily neutralize certain values within themselves which would normally prohibit them from carrying out such acts, such as morality, obligation to abide by the law, and so on. In simpler terms, it is a psychological method for people to turn off "inner protests" when they do, or are about to do something they themselves perceive as wrong.

Methods of Rationalization or Neutrialization-

• Denial of responsibility. The offender will propose that they were victims of circumstance or were forced into situations beyond their control.
• Denial of injury. The offender insists that their actions did not cause any harm or damage.
• Denial of the victim. The offender believes that the victim deserved whatever action the offender committed.
• Condemnation of the condemners. The offenders maintain that those who condemn their offense are doing so purely out of spite, or are shifting the blame off of themselves unfairly.
• Appeal to higher loyalties. The offender suggests that his or her offense was for the greater good, with long term consequences that would justify their actions, such as protection of a friend.

Explaination of rationalization with respect to Cressey's fraud theory.-

-Donald Cressey’s well-known “Fraud Triangle” identifies three elements needed to trigger a fraud: opportunity, motivation or pressure, or rationalization.If the rationalization is successful, the fraudster will not feel guilt or remorse. In fact, he or she may rationalize themselves as the victim.

-The opportunity and motivation sides of the fraud triangle are a little more objective than rationalization. There is a decent chance to observe the circumstances that might lead someone to commit a fraud, such as weak internal financial controls (opportunity) or knowing that an employee is having intense money problems (motivation).Organization can improve its knowledge of opportunity through better auditing procedures, and we can learn more about our employee by regular internal reviews.But rationalization is a psychological state that’s very difficult to see.

-Organizations have more straightforward ways to detect and prevent fraud based on opportunity and motivation factors, but there are some things that may help to deflect the perceptions that might lead to fraud. In general, what might be the circumstances that breed rationalizations for fraud, ITS DIFFICULT TO DETERMINE

-There is no perfect answer here because there will always be people who justify fraud under any conditions. But if the organization does permit hiring, firing, promoting, and rewarding through personal connections (it’s who you know), or exploits workers, or allows other actions that an objective person might consider unfair, then the soil is prepared for fraud rationalization.

-A healthy organizational culture is an important tool in preventing fraud.