Reading 40: Financial Reporting Quality: Red Flags and Accou style, center, triangle, following, 2011

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Session 10: Financial Reporting and Analysis: Applications and International Standards Convergence
Reading 40: Financial Reporting Quality: Red Flags and Accounting Warning Signs

LOS c: Describe the “fraud triangle.”

 

 

Which of the following sets of conditions make up the fraud triangle?

A) Pressure, greed, weakness in internal controls.

B) Opportunity, attitude, greed.

C) Incentive, opportunity, rationalization.

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The fraud triangle has three points: incentive/pressure, opportunity, and attitude/rationalization.

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Marnie Colston, CFA, suspects one of the companies she covers is committing accounting fraud. She has uncovered evidence of pressure to increase earnings and weak internal controls. To satisfy the third point of the fraud triangle, Colston should try to find a sign of:

A) motivation.

B) rationalization.

C) temptation.

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The fraud triangle has three points: incentive/pressure, opportunity, and attitude/rationalization.

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The fraud triangle consists of three:

A) conditions usually present when fraud occurs.

B) strategies for unearthing financial fraud.

C) of the of the most common types of fraud.

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The fraud triangle is a creation of the American Institute of Certified Public Accountants and represents three conditions usually present when fraud occurs.