Final answer:
The fraud triangle includes Opportunity, which allows for the fraud to happen; Pressure, the motivation behind the fraud; and Rationalization, the individual's justification for the fraudulent actions.
Step-by-step explanation:
The fraud triangle is a model commonly used in auditing and forensic accounting to explain the reasons behind an individual's decision to commit fraud.
The three terms that make up the fraud triangle are:
- Opportunity: The situation that allows the fraud to occur. This could be due to weak internal controls or processes that are not strictly enforced.
- Pressure (or Motivation): The personal need or external pressure that drives an individual to commit fraud, such as financial problems.
- Rationalization: The mental process that the individual uses to justify the fraudulent behavior as acceptable or necessary.
Understanding these three components helps to identify and mitigate the risk of fraud within an organization.