Multiple Choice
Business managers need a set of ethical guidelines to help them:
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6. Internal Controls and Reporting Cash
Fraud and the Fraud Triangle
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Which of the following best describes a risk analysis in the context of fraud and the fraud triangle?
A
A method for recording all financial transactions in a company's general ledger.
B
A technique used to calculate the profitability of a new business venture.
C
A legal procedure for prosecuting individuals accused of committing fraud.
D
A process of identifying and evaluating factors that could lead to fraud within an organization.
Verified step by step guidance1
Understand the concept of the fraud triangle, which consists of three elements: opportunity, pressure, and rationalization. These are the factors that contribute to fraudulent behavior.
Recognize that risk analysis in the context of fraud involves identifying and evaluating these factors within an organization to understand vulnerabilities.
Differentiate risk analysis from other unrelated processes, such as recording financial transactions, calculating profitability, or legal prosecution, as these are not directly related to fraud prevention.
Focus on how risk analysis helps organizations proactively address potential fraud risks by implementing controls to reduce opportunities, addressing pressures, and discouraging rationalization.
Conclude that the correct description of risk analysis in this context is: 'A process of identifying and evaluating factors that could lead to fraud within an organization.'
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