What is the primary reason that so many new businesses fail, according to the Fraud Triangle framework?

• A. Lack of sufficient internal controls, leading to increased opportunity for fraud
• B. Excessive government regulation
• C. High employee turnover
• D. Overinvestment in marketing

Answer: (A)

Verified step by step guidance

1. Understand the Fraud Triangle framework, which consists of three elements: Opportunity, Pressure, and Rationalization. These elements explain the conditions under which fraud is likely to occur.
2. Focus on the 'Opportunity' element of the Fraud Triangle. Opportunity arises when there are weaknesses in internal controls, allowing individuals to commit fraud without detection.
3. Analyze the options provided in the question. The correct answer should align with the concept of 'Opportunity' in the Fraud Triangle, which is directly related to the lack of sufficient internal controls.
4. Eliminate options that do not pertain to the Fraud Triangle framework. For example, excessive government regulation, high employee turnover, and overinvestment in marketing are not directly related to the opportunity for fraud.
5. Conclude that the primary reason many new businesses fail, according to the Fraud Triangle framework, is the lack of sufficient internal controls, which increases the opportunity for fraud.