Which of the following situations is most likely to lead to unethical behavior in a business setting, according to the fraud triangle?

• A. An employee faces significant financial pressure and perceives an opportunity to commit fraud without detection.
• B. Employees receive regular ethics training and are encouraged to report suspicious activities.
• C. Management fosters a transparent and open communication environment.
• D. A company has strong internal controls and regular external audits.

Answer: (A)

Verified step by step guidance

1. Understand the concept of the fraud triangle, which consists of three elements: pressure, opportunity, and rationalization. These elements explain why individuals may commit fraud.
2. Analyze the first option: 'An employee faces significant financial pressure and perceives an opportunity to commit fraud without detection.' This aligns with the fraud triangle as it includes both pressure (financial stress) and opportunity (lack of detection).
3. Evaluate the second option: 'Employees receive regular ethics training and are encouraged to report suspicious activities.' This does not align with the fraud triangle, as ethics training and reporting mechanisms reduce the opportunity for fraud.
4. Assess the third option: 'Management fosters a transparent and open communication environment.' Transparency and open communication reduce the likelihood of fraud by addressing rationalization and opportunity.
5. Review the fourth option: 'A company has strong internal controls and regular external audits.' Strong internal controls and audits minimize opportunities for fraud, making this option less likely to lead to unethical behavior.