Which of the following is not a risk factor related to incentives and pressures for fraud?

Which of the following is not a risk factor related to incentives and pressures for fraud?

	a.	Heavy gambling problems of one of the board members
	b.	Lucrative bonus plans executives and managers based solely on firm’s financial performance
	c.	Understating earnings for tax reporting purposes

Solutions

Expert Solution

option a
Heavy gambling problems of one of the board members is not a risk factor as it is a personal expense of the manager. One manager being involved in such activity would not have an impact on the company's statement manipulation

Lucrative bonus plans executives and managers based solely on firm’s financial performance.
Executives and managers might try to increase the company's financial performance for a lucrative bonus. Bonuses for the managers are based primarily on the financial performance of the company hence in order to get better incentives, pressure for fraud and manipulating the firm's statements increases.

Understating earnings for tax would lower the company's financial position hence resulting in low tax burden on the company is also an example of manipulation of statements and fraud

jeff jeffy answered 1 year ago

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