Multiple Choice
Which of the following groups should NOT be a part of the risk identification process when assessing fraud risk within an organization?
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6. Internal Controls and Reporting Cash
Fraud and the Fraud Triangle
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Which element of the fraud triangle do companies have the greatest ability to eliminate?
A
Rationalization
B
Opportunity
C
Greed
D
Pressure
Verified step by step guidance1
Understand the fraud triangle, which consists of three elements: Opportunity, Pressure, and Rationalization. These elements explain why individuals commit fraud.
Recognize that 'Opportunity' refers to the ability to commit fraud due to weak internal controls or lack of oversight. Companies can address this by implementing strong internal controls and monitoring systems.
Identify 'Pressure,' which relates to external or internal forces that drive individuals to commit fraud, such as financial difficulties or unrealistic performance expectations. Companies can reduce pressure by fostering a supportive work environment and offering employee assistance programs.
Understand 'Rationalization,' which is the mental justification individuals use to excuse fraudulent behavior. Companies can combat this by promoting ethical behavior and providing training on the importance of integrity.
Conclude that companies have the greatest ability to eliminate 'Opportunity' by strengthening internal controls, conducting regular audits, and ensuring proper segregation of duties to reduce the chances of fraud occurring.
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