Question 1

Ron notices that there are no safeguards over company inventory, and tells himself that the company is probably going to write the inventory off as obsolete anyway. However, he doesn't really need the inventory. Because there is no ________, Ron is less likely to commit fraud.

Accepted Answer

Perceived pressure is a key element in the fraud triangle. Without it, Ron lacks the motivation to commit fraud, even if there is an opportunity and rationalization.

Question 2

Removing any of the components of the Fraud Triangle:

Accepted Answer

The Fraud Triangle consists of three components: opportunity, rationalization, and pressure. Removing any one of these components makes it less likely that fraud will occur. For example, if an organization implements strong internal controls and monitoring, it decreases the opportunity for employees to commit fraud. Similarly, if an organization creates a culture of ethical behavior and fosters a positive work environment, it can decrease the pressure to commit fraud and reduce the likelihood of rationalizing fraudulent behavior.

Question 3

If an employee has a low incentive to commit fraud, the employee does NOT have:

Accepted Answer

Perceived pressure is a key factor that motivates individuals to commit fraud. If an employee has low incentive to commit fraud, it indicates that they do not feel significant pressure to do so.

Question 4

The factor that might make a person steal money because "The company has more than its fair share," would be:

Accepted Answer

Rationalization is a justification or excuse that a person may create to justify their unethical behavior. In this case, the person may rationalize that the company has more money than it needs or deserves, and therefore it is acceptable to take some without consequences. The other options, realization, perceived opportunity, and perceived pressure, may influence the decision to steal, but the underlying reason or justification is rationalization.

Question 5

Committing a fraud because of a gambling addiction is related to what part of the Fraud Triangle?

Accepted Answer

Perceived pressure is the part of the Fraud Triangle that describes an internal or external reason that an individual might have for committing fraud. In this case, a gambling addiction could create a sense of pressure to find money to keep gambling, leading an individual to commit fraud.

Question 6

Which of the following is NOT part of the Fraud Triangle?

Accepted Answer

Realization is not a part of the Fraud Triangle, which consists of perceived pressure, perceived opportunity, and rationalization. Realization implies that the individual committing fraud knows they are committing fraud, whereas the Fraud Triangle is focused on the conditions that lead someone to commit fraud in the first place.

Question 7

As it relates to accounting fraud, which of the following BEST describes "perceived pressure"?

Accepted Answer

Perceived pressure is one of the three elements of the fraud triangle (along with rationalization and opportunity) and refers to the employee's perceived need to obtain cash or other assets, often due to personal financial struggles or external pressures such as meeting targets or maintaining a certain lifestyle.

Question 8

Attempting to justify your actions is an example of:

Accepted Answer

Rationalization refers to attempting to justify or provide a rational reason for one's actions or decisions, often to alleviate guilt or to make oneself feel better about the choice made.

Question 9

Finding good reasons for doing things that we REALLY know are wrong is an example of:

Accepted Answer

Rationalization is the process of justifying or explaining behavior or decisions that are not considered socially acceptable or morally right. It involves finding good reasons for doing things that deep down we know are wrong, to make ourselves feel better about it. This can be a defense mechanism to avoid feeling guilt or shame about our actions.

Question 10

Joe was overlooked for a promotion and decides to embezzle money because he feels like he deserved that raise. This is an example of, respectively:

Accepted Answer

Joe feels pressure because he was overlooked for a promotion (perceived pressure) and justifies his actions by believing he deserved the raise (rationalization).

Question 11

Larry is concerned that the company won't meet expected earnings, so he overstates revenues, telling himself "it's for a good reason!" This is an example of, respectively:

Accepted Answer

Larry's concern about not meeting expected earnings represents perceived pressure, and his justification of overstating revenues "for a good reason" is an example of rationalization.

Question 12

The factor that would make a person feel forced to steal money because of high medical bills would be:

Accepted Answer

The factor that would make a person feel forced to steal money because of high medical bills is perceived pressure, which could be financial or emotional pressure. This pressure may lead the person to rationalize their actions and perceive the act of stealing as an opportunity to alleviate the pressure. Realization may occur after the act, but it is not the factor that would force the person to steal.

Question 13

The chance to commit a fraud, conceal it, and avoid punishment is an example of:

Accepted Answer

Perceived opportunity refers to the belief that one has the chance to commit a fraudulent act and avoid getting caught. This can include factors such as weak internal controls or lack of oversight, which make it easier for an individual to deceive the system without being detected.

Question 14

Recording assets that the company does NOT possess is an example of:

Accepted Answer

Recording assets that the company does not possess is a form of management fraud, where the management intentionally misrepresents the financial statements to deceive stakeholders. Employee fraud, collusion, and embezzlement are all different types of fraudulent activities that may occur within an organization, but they are not specifically related to recording non-existent assets.

Question 15

Committing a fraud because of easy access to a company's assets is an example of:

Accepted Answer

Perceived opportunity refers to the belief that one can commit a fraud without getting caught due to easy access to company assets or weaknesses in internal controls.

Question 16

Committing a fraud because of a drug habit or living beyond your means is an example of:

Accepted Answer

Committing fraud due to a drug habit or living beyond one's means is an example of perceived pressure, as the individual feels compelled to commit fraud to relieve or address this pressure.

Question 17

________ can be reduced through a good system of internal control.

Accepted Answer

The answer of ________ can be reduced through a good...

Question 18

"I didn't steal the money, I only borrowed it until I can pay it back" is an example of:

Accepted Answer

The statement is an example of rationalization, which is the process of making excuses or justifications for unethical behavior. The person is attempting to justify their actions by framing it as a harmless borrowing rather than acknowledging that they took the money without permission.

Question 19

Committing a fraud because the employee feels "I deserve a pay raise. The company owes this to me" is related to what part of the Fraud Triangle?

Accepted Answer

Rationalization is the part of the Fraud Triangle where fraudsters justify their fraudulent behavior to themselves by finding a morally acceptable reason. In this scenario, the employee believes that they deserve a pay raise and that the company owes it to them, which is a form of rationalization.

Question 20

Sydney just found out that her dog needs an expensive operation. Sydney is a trusted employee in a small firm, and she knows that nobody double checks her deposits. However, her moral beliefs do not allow her to take advantage of the lack of controls. Because there is no _________, Sydney is less likely to commit fraud.

Accepted Answer

The answer of Sydney just found out that her dog...

Quiz 6: The Challenges of Accounting: Standards, Internal Control, Audits, Fraud, and Ethics