According to the principles of internal control and the fraud triangle, under which circumstance should inspections not take place?

• A. Inspections should not take place if management trusts all employees.
• B. Inspections should not take place when the company is experiencing high profitability.
• C. There are no circumstances in which inspections should not take place, as regular inspections help prevent and detect fraud.
• D. Inspections should not take place if employees have worked at the company for more than 10 years.

Answer: (C)

Verified step by step guidance

1. Understand the principles of internal control, which emphasize the importance of regular inspections to prevent and detect fraud.
2. Review the fraud triangle, which highlights three factors that contribute to fraud: opportunity, pressure, and rationalization. Inspections help reduce opportunities for fraud.
3. Evaluate the given options and recognize that trust, profitability, or employee tenure do not eliminate the risk of fraud. Regular inspections are necessary regardless of these factors.
4. Acknowledge that the correct principle is that inspections should always take place, as they are a critical component of maintaining internal control and safeguarding assets.
5. Conclude that there are no circumstances under which inspections should not take place, as they are essential for preventing and detecting fraud in any organization.