What does the term "Fraud Triangle" represent?

The term "Fraud Triangle" represents a model that explains the three key elements that lead to fraudulent behavior: pressure, opportunity, and rationalization.

Pressure refers to the motivation or incentive that drives an individual to commit fraud, such as financial difficulties, addiction, or personal problems. Opportunity outlines the ability or means to commit the fraud, which can arise due to a lack of internal controls or oversight within an organization. Lastly, rationalization is the cognitive process through which the fraudster justifies their actions, convincing themselves that their dishonest behavior is acceptable or necessary.

This model is crucial for understanding how fraud occurs and is instrumental in developing strategies to prevent and detect fraudulent activities. Awareness of these three components helps organizations create a more robust control environment and address the underlying factors that can lead to fraud.

The other options do not accurately define the core concept represented by the Fraud Triangle; for instance, the elements of risk and outcome do not distinctly capture the motivations and justifications of fraudsters. Similarly, fraud detection stages or types of investigations do not pertain to the factors that contribute to the commission of fraud itself, making them unrelated to the essence of the Fraud Triangle.