Which of the following is a common incentive or condition that increases the likelihood for fraudulent financial reporting?
A)Ineffective segregation of assets.
B)Significant related party transactions.
C)Management bonuses based on reported earnings.
D)Access to undeposited cash.

Question

Quizplus · Accepted Answer

Management bonuses based on reported earnings provides a clear incentive for management to manipulate financial statements in order to meet or exceed earnings targets and maximize their bonuses. The other choices, while potentially indicating weaknesses in internal controls, do not necessarily directly correlate with an increased likelihood of fraudulent financial reporting.

Which of the Following Is a Common Incentive or Condition