Which of the following would be considered unethical in a business setting according to the principles of the fraud triangle?

• A. Reporting suspected fraud to management
• B. Providing accurate information to auditors
• C. Implementing internal controls to prevent theft
• D. Falsifying financial records to meet earnings targets

Answer: (D)

Verified step by step guidance

1. Understand the principles of the fraud triangle, which include three components: pressure (motivation to commit fraud), opportunity (a situation that allows fraud to occur), and rationalization (justification for the fraudulent behavior).
2. Analyze the options provided in the question to determine which action aligns with unethical behavior as described by the fraud triangle.
3. Option 1: 'Reporting suspected fraud to management' is ethical and aligns with proper business conduct, as it helps address potential fraud.
4. Option 2: 'Providing accurate information to auditors' is also ethical, as it ensures transparency and compliance with accounting standards.
5. Option 4: 'Falsifying financial records to meet earnings targets' is unethical because it involves intentional misrepresentation of financial data, which directly violates ethical principles and aligns with the fraud triangle's concept of rationalization and opportunity.