Exercise 3 (Chapter 4) – Fraud Triangle Mike Spears is a CPA with a secret. His
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Question
Exercise 3 (Chapter 4) – Fraud Triangle Mike Spears is a CPA with a secret. His secret is that he gambles on sports. Mike knows that his profession disapproves of gambling, but considers the professional standards to be misguided in his case. Mike really doesn’t consider his bets to be gambling because he spends a lot of time studying sports facts. He believes that he is simply making educated decisions based on facts. He argues that using sports facts to place bets is no different than using accounting information to buy stock.
REQUIRED: Use the fraud triangle as a basis to comment on Mike Spears’ gambling activities.
Explanation / Answer
Fraud triangle is a framework for spotting high risk fraud situation. This was found by American sociologist Donald R. Cressey. There are 3 factors that made fraud triangle. Those are,
1. Pressure
2. Opportunity
3. Rationalization
1. Pressure
For committing crime, people required pressure. Pressure can be happen because of gambling debt, money problem, family problem, Greed etc. Pressure can be happen internally or externally. This means pressure can be happen due to the self-observation or other people observation. In this case Mike Spears is gambles on sports. He is also a CPA. Therefore possibly greed is the fact that he affected as pressure. Because he think that he wasn’t pay enough money for his hard work and he motivate to do gambling activities.
2. Opportunity
Opportunity arises because of ability to fraud without caught them. If the organizations or legislative parties didn’t get the attention people can do fraud easily without caught them. Also people think that those frauds are unlikely to be discovered. In this case mike knows that his profession disapproves of gambling. However he considers that professional standards can be misguided in this case. Hence mike is a CPA he knows every standards well about his profession and gambling activities. Therefore Mike has the opportunity do his secret work without caught them.
3. Rationalization
In this factor people are try to justify the crime. So then they commit the crime without hesitation. Because mind was set Rationalization is often based on external factors, such as dishonest employer which is seen to minimize or mitigate the harm done by the crime. In this case Mike thinks that his bet is not gambling. Because he spend lot of time in studying sports facts. He justify well about his crime as a profession. Because he said it is like buy stock using accounting information.
Mike Spears gambling activities are unethical to his profession. Mike knows that well. However according to above 3 factors he decided to do gambling activities.
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