5. Which of the following statements best reflects the nature of the relationship of fraud risk...

5. Which of the following statements best reflects the nature of the relationship of fraud risk factors to the existence of financial statement fraud perpetuated by a company’s management? (2 points)

A. The existence of at least one fraud risk factor indicates that a financial statement fraud has definitely occurred.

B. The lack of existence of at least one fraud risk factor indicates that a financial statement fraud has definitely not occurred.

C. The existence of at least one fraud risk factor indicates that there is higher risk that a financial statement fraud has occurred.

D. The existence of at least one fraud risk factor has no bearing on whether or not a financial statement fraud has occurred.

Expert Solution

Solution: The existence of at least one fraud risk factor has no bearing on whether or not a financial statement fraud has occurred.

Explanation: The three fraud risk factor are: pressure/ incentive to perpetrate fraud; an opportunity to do the fraud; and rationalization/attitude on the justification of the fraudulent action. The presence of at least one fraud risk factor is not an indicator of fraud in the financial statements.

ekkarill92 answered 2 years ago

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