Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

Financial Accounting

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

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Multiple Choice

Which of the following best represents the 'rationalization' risk factor in the fraud triangle?

A manager is under pressure to meet unrealistic sales targets.

An employee believes they deserve a higher salary and justifies stealing from the company.

An employee is offered a promotion for meeting performance goals.

A company lacks proper internal controls, making it easy to commit fraud.

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Verified step by step guidance

Step 1: Understand the fraud triangle, which consists of three components: pressure, opportunity, and rationalization. Rationalization refers to the mindset or justification an individual uses to commit fraud.

Step 2: Analyze the options provided in the problem to identify which one aligns with the rationalization component. Rationalization involves the individual convincing themselves that their fraudulent actions are acceptable or justified.

Step 3: Evaluate each option: - 'A manager is under pressure to meet unrealistic sales targets' aligns with the pressure component. - 'An employee believes they deserve a higher salary and justifies stealing from the company' aligns with rationalization, as the employee is justifying their fraudulent behavior. - 'An employee is offered a promotion for meeting performance goals' does not directly relate to rationalization. - 'A company lacks proper internal controls, making it easy to commit fraud' aligns with the opportunity component.

Step 4: Based on the analysis, identify the option that best represents rationalization. It is the one where the individual justifies their fraudulent actions due to perceived unfair treatment or entitlement.

Step 5: Conclude that the correct answer is the option where 'An employee believes they deserve a higher salary and justifies stealing from the company,' as it directly reflects the rationalization risk factor in the fraud triangle.