Multiple Choice
Which of the following tactics may reduce risks of fraud in supplier delivery according to the fraud triangle framework?
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6. Internal Controls and Reporting Cash
Fraud and the Fraud Triangle
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Which of the following best defines fraud in a business context?
A
A legal method of reducing tax liability through proper planning.
B
A mistake made in recording business transactions due to lack of knowledge or oversight.
C
A routine business practice that increases company profits.
D
An intentional act by one or more individuals to deceive others, resulting in a misstatement of financial statements or misappropriation of assets.
Verified step by step guidance1
Understand the definition of fraud in a business context: Fraud involves intentional deception by individuals to misstate financial statements or misappropriate assets.
Eliminate options that do not align with the definition of fraud. For example, a legal method of reducing tax liability through proper planning is not fraud, as it is lawful and intentional but not deceptive.
Recognize that a mistake made in recording business transactions due to lack of knowledge or oversight is an error, not fraud, as it lacks intent to deceive.
Identify that a routine business practice that increases company profits is not fraud, as it does not involve deception or misstatement of financial information.
Conclude that the correct definition of fraud is: 'An intentional act by one or more individuals to deceive others, resulting in a misstatement of financial statements or misappropriation of assets.'
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