Question

In: Accounting

Research has shown that situational pressures and opportunity are factors that contribute to fraudulent behavior.

Required

a. Identify two situational pressures in a public company that would increase the likelihood of fraud.

b. Identify three opportune moments that would increase the likelihood of fraud.

Expert Solution

a.

Examples of situational pressures in a public company that would increase the likelihood of fraud include:

Competitive pressures.

Excessive expectations for financial targets.

Penalties for not meeting budget targets.

Sudden decreases in revenue or market share.

Payment with stock options or other bonus programs that depend on short-term economic performance

b.

Opportunity situations that would increase the likelihood of fraud include:

Weak or nonexistent internal accounting controls.

Accounting estimates requiring significant judgment by company management.

Poor segregation of duties.

Absence of policies that limit collusion, such as nepotism rules.

Junaid answered 9 months ago

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