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 business risk is most avoidable with proper precautions, according to the principles of the fraud triangle?

Economic downturns affecting sales

Natural disasters damaging assets

Employee fraud due to opportunity

Changes in government regulations

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Verified step by step guidance

Understand the fraud triangle, which consists of three elements: opportunity, pressure, and rationalization. These are the conditions that lead to fraudulent behavior.

Recognize that 'opportunity' is the most controllable element of the fraud triangle. Businesses can implement internal controls to reduce opportunities for fraud.

Learn about internal controls such as segregation of duties, regular audits, and access restrictions. These measures help minimize the chances of employee fraud.

Compare the other risks mentioned in the problem: economic downturns, natural disasters, and changes in government regulations. These risks are external and less controllable compared to employee fraud due to opportunity.

Conclude that proper precautions, such as implementing strong internal controls, can significantly reduce the risk of employee fraud due to opportunity, making it the most avoidable risk in this context.