Rationalizing Fraud

How Thinking Like a Crook Can Help Prevent Fraud

Natalia Mintchik, PhD, CPA, and Jennifer Riley, PhD, CPA

In BriefThe well-known fraud triangle framework includes three distinct components—perceived pressures, perceived opportunities, and rationalizations—but until recently very little was known about perpetrators' rationalizations. The authors discuss the verbalizations used by fraud perpetrators to convince themselves that they are doing nothing wrong, as well as how fraud-related theories from the social sciences can inform the accounting profession. They argue that understanding the techniques that allow fraudsters to justify their crimes may prove to be the missing piece of the fraud prevention puzzle, and that better understanding of rationalizations could help corporate governance experts and auditors strengthen their antifraud programs.