A company is concerned that its lenders will declare the loans in default if the company reports its true earnings, so management lies and reports high enough earnings to appear to comply with its loan agreements. Which element of the fraud triangle is most clearly involved?
A) Pressures or incentives
B) Opportunities to commit fraud
C) Rationalizations
D) Sociopathic behavior

Question

Quizplus · Accepted Answer

The company is under pressure or incentive to report higher earnings to comply with loan agreements and avoid default.

A Company Is Concerned That Its Lenders Will Declare the Loans