Organizations that fail to maintain accurate, relevant, and timely accounting records are most likely increasing which element of the fraud triangle?

• A. Opportunity
• B. Rationalization
• C. Pressure
• D. Collusion

Answer: (A)

Verified step by step guidance

1. Understand the fraud triangle: The fraud triangle consists of three elements—Opportunity, Rationalization, and Pressure—that explain why individuals commit fraud.
2. Analyze the role of accounting records: Accurate, relevant, and timely accounting records help organizations monitor financial activities and detect irregularities, reducing the chance for fraudulent activities.
3. Connect the concept of 'Opportunity': Opportunity arises when there are weaknesses in internal controls or systems, such as poor record-keeping, which make it easier for individuals to commit fraud without being detected.
4. Evaluate the other elements: Rationalization refers to the mindset that justifies fraudulent behavior, and Pressure refers to external or internal forces that drive individuals to commit fraud. These elements are less directly impacted by accounting records compared to Opportunity.
5. Conclude that failing to maintain proper accounting records increases the 'Opportunity' element of the fraud triangle, as it creates gaps in oversight and control.