A company decides it should engage in aggressive "earnings management" because it feels that this will be in the interests of current shareholders, and "everybody else does it," so the company should not look bad in comparison. 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

Rationalizations are involved here, as the company justifies its decision to engage in aggressive "earnings management" by believing it is in the interest of current shareholders and by the notion that "everybody else does it," thus making it seem acceptable.

A Company Decides It Should Engage in Aggressive "Earnings Management