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 transactions has the most risk of fraud according to the Fraud Triangle?

A company deposits daily cash receipts into the bank at the end of each day

A customer pays for goods using a credit card at a retail store

An external auditor reviews the company's annual financial statements

An employee with financial pressure processes refunds without managerial oversight

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Verified step by step guidance

Understand the Fraud Triangle: The Fraud Triangle consists of three elements that contribute to fraud—Pressure, Opportunity, and Rationalization. Pressure refers to financial or personal stress, Opportunity arises from weak controls or oversight, and Rationalization is the justification for unethical behavior.

Analyze the transactions: Review each transaction in the context of the Fraud Triangle to identify which one has the highest risk of fraud.

Evaluate the first transaction: Depositing daily cash receipts into the bank at the end of each day has minimal risk if proper controls are in place, such as dual custody or reconciliation processes.

Evaluate the second transaction: A customer paying with a credit card at a retail store has low fraud risk for the company, as credit card companies typically handle fraud prevention and detection.

Evaluate the fourth transaction: An employee with financial pressure processing refunds without managerial oversight presents a high risk of fraud. This scenario aligns with the Fraud Triangle—financial pressure (Pressure), lack of oversight (Opportunity), and potential justification for unethical behavior (Rationalization).