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

The risk of loss due to fraud may be classified as which of the following types of risk?

Interest rate risk

Market risk

Liquidity risk

Inherent risk

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Verified step by step guidance

Understand the concept of inherent risk: Inherent risk refers to the susceptibility of an account balance or class of transactions to material misstatement, assuming there are no related internal controls in place. It includes risks such as fraud or errors that are naturally present in financial reporting.

Differentiate between the types of risks mentioned: Interest rate risk relates to changes in interest rates affecting financial performance, market risk involves fluctuations in market prices, and liquidity risk pertains to the inability to meet short-term financial obligations. None of these directly address the risk of fraud.

Recognize that fraud is a natural risk in financial reporting: Fraud is an example of an inherent risk because it exists due to the nature of human behavior and the complexity of financial transactions, regardless of the controls implemented.

Connect the classification of fraud risk to inherent risk: Since inherent risk encompasses risks that exist before considering any mitigating controls, the risk of fraud is classified under inherent risk.

Conclude that the correct classification for the risk of loss due to fraud is inherent risk, as it aligns with the definition and scope of inherent risk in financial accounting.