Iconic Fraud Triangle endures

Metaphor diagram helps everybody understand fraud

By W. Steve Albrecht, Ph.D., CFE, CPA, CIA

One of the creators of the venerable Fraud Triangle describes its history, rationale and uses for preventing, deterring, detecting and investigating fraud (and other crimes).

All students of anti-fraud principles — whether in higher education or on the job —eventually learn about the seminal Fraud Triangle. We can find this diagram in fraud examination, accounting, auditing and marketing literature. The Fraud Triangle is universally accepted in almost every setting in which fraud is described or analyzed.

The triangle states that individuals are motivated to commit fraud when three elements come together: 1) some kind of perceived pressure 2) some perceived opportunity and 3) some way to rationalize the fraud as not being inconsistent with one's values. (See "The Fraud Triangle" below.)



Because of my early fraud research in business, many have asked me if I was the person who first developed this triangle. The answer is yes and no. In this article, I'll present a brief history of how the Fraud Triangle came to be.

Two individuals who probably deserve the most credit for the fraud model are early criminology researchers Edwin Sutherland and Donald Cressey. Sutherland developed the "differential association" theory of why people commit crimes. In his view, criminal behavior is linked to a person's association with a criminal environment. He believed that people encounter various social influences throughout their lives. Some individuals have social interactions with individuals having criminalistic tendencies and so become criminals as a consequence of this association. The major elements of Sutherland's differential association theory can be summarized as follows (Sutherland and Cressey, 1978):

  • Criminal behavior is learned; it's not inherited, and the person who isn't already trained in crime doesn't invent criminal behavior.
  • Criminal behavior is learned through interaction with other people through the processes of verbal communication and example.
  • The principle learning of criminal behavior occurs with intimate personal groups.
  • The learning of crime includes learning the techniques of committing the crime and the motives, drives, rationalizations and attitudes that accompany it.
  • A person becomes delinquent because of an excess of definitions (or personal reactions) favorable to the violation of the law.

(See "Criminology," by Edwin Hardin Sutherland and Donald Ray Cressey, Lippincott, 1978.)

The essence of Sutherland's argument is that persons who engage in criminal behavior have accumulated enough feelings and rationalizations in favor of law violation that outweigh their pro-social definitions. Criminal behavior is learned and will occur when perceived rewards for criminal behavior exceed the rewards for lawful behavior or perceived opportunity. Thus, while not directly introducing the Fraud Triangle, Sutherland did introduce the concepts of rationalizations and opportunities.


The person who should get the most credit for developing the fraud triangle was Donald Cressey — a co-author with and student of Edwin Sutherland. In both a November 1951 article, "Why Do Trusted Persons Commit Fraud? A Social-Psychological Study of Defalcators," in the Journal of Accountancy, and on page 973 of his 1953 book, "Other People's Money, A Study in the Social Psychology of Embezzlement" (published by Patterson Smith), he defined the fraud problem as a "violation of a position of financial trust" that the person originally took in good faith. To quote from his book:

  • Trusted persons become trust violators when they conceive of themselves as having a financial problem that is non-sharable, are aware that this problem can be secretly resolved by violation of the position of financial trust, and are able to apply to their contacts in that situation verbalizations which enable them to adjust their conceptions of themselves as users of the entrusted funds or property. (In other words, they're able to rationalize their dishonest actions, and so they aren't — in their minds — inconsistent with their personal codes of conduct.)

He stated that for embezzlement to occur, there must be: 1) a non-sharable problem, 2) an opportunity for trust violation and 3) a set of rationalizations that define the behavior as appropriate in a given situation. He wrote that none of these elements alone would be sufficient to result in embezzlement; instead, all three elements must be present.


He developed this theory based on in-depth interviews with those convicted of trust violations. He claimed that all the cases he studied conformed to the three-step process. While he identified the three elements that we now refer to as the Fraud Triangle, he never drew or referred to them as a triangle nor used the term "fraud triangle." He also limited his discussion to embezzlement and not to fraud in general. However, if there's one individual who should be called the father of the elements of the Fraud Triangle, it's Donald Cressey.

Sutherland and Cressey, both criminologists, were professors and researchers teaching criminology in sociology departments. Aside from Cressey's 1951 Journal of Accountancy article, we have no evidence that either ever published in business literature.

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By Anonymous
Book Report – Other People’s Money, A Study in the Social Psychology of Embezzlement by Donald R. Cressey The Free Press, Copyright 1953, 157 pages This book was written almost 60 years ago. It is still frequently, if not always, cited or referred to in some manner during any discussion or class that deals with fraud. I decided to examine the source for myself. He attempts to follow proper design and procedure for scientific research. The criteria used for selecting cases were: 1. Accepting a position of trust in good faith, and 2. A criminal violation of financial trust. “The legal concept of embezzlement was abandoned.” (p. 20) There is a lot of filtering based on the author’s strict definitions of criminal acts, embezzlement, forgery, confidence game and larceny by bailee. There is also a lot of discussion regarding an innate defect, depravity or other mental abnormality. The subjects often describe themselves as not acting in my right mind, or other words to that effect. However, the author doe
By Anonymous
There's a *Fraud* magazine???
By Anonymous
I disagree with "Professor" below, who's linked double-spaced, poorly proofed and jejune paper does little more than repeat what they have written here (""fraud triangle" has nothing to do with fraud") multiple times, spending 20 pages essentially arguing that the illustrative framework should really be called the "Embezzlement Triangle." The Professor has, in fact, committed a rather silly ignoratio elenchi, arguing that because the originators of the Fraud Triangle were actually speaking about embezzlement, the Fraud Triangle has been "been misused, abused, contorted, stretched out of shape, and pressed into uses for which it was never intended and cannot possibly accommodate." They then utterly fail to mount a convincing argument to prove this assertion. Continually repeating one's opening argument doesn't count.
By Anonymous
Ah, the age old Nature vs. Nurture argument. Clearly, the authors sided with "nurture" as the extract below indicates: "The major elements of Sutherland's differential association theory can be summarized as follows (Sutherland and Cressey, 1978): Criminal behavior is learned; it's not inherited, and the person who isn't already trained in crime doesn't invent criminal behavior." Of course, that fails to explain origins. How were the first crimes committed? Nature AND nurture both play a role in criminal behavior. Scholars sometimes have difficulty recognizing the "sin nature" (yetzer hara) in man that invents evil, then conditions/trains others (all with the same nature) in such behavior. The only hope for "fallen man" is to become a "new creation..."
By Anonymous
By Professor
The "fraud triangle" has nothing to do with fraud. See "Forensic Accounting, Fraud Theory, and the End of the Fraud Triangle, " Journal of Theoretical Accounting Research, 12(2), 28-48, 2017, https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=371197.
By Michael_22
By Bernhard_Maier
By Stefano_Pelliccia
By John_4
Many great innovations in this article to the fraud triangle. Likely a useful tool for auditors and investigators, but somewhat simplistic for those specializing in a new generation of situational crime prevention science which factors the role emotions play in human behavior, judgments and complex decision making.
By Alejandro_2
By ForensicCPA
By Mark_Lokanan
Excellent article Dr. Albrecht. Sutherland's work in macro-sociology form the bedrock of the FT.
By super_auditor
Bravo! An excellent and enlightening history and summary! The additional triangles are fantastic! All auditors and investigators should be grateful for this knowledge, as it clearly has a significant impact on our work!
By Gustavo_Luna