Question

-/5 Question 45 Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify the three factors and explain what is meant by each. Type your answer

Answer 1

Question 45

The 3 factors that contribute to employee frauds are:

1. Opportunity - This is one of the major factor contributing towards employee frauds. The opportunity to commit fraud can motivate the employee to do the wrong. An employee won't commit a fraud if there is no opportunity even though he has the motive to commit a fraud. Weak controls in an organisation can give the opportunity to the maleficent employee.

2. Financial pressure - An employee can be under pressure due to various reasons. Pressure may be caused due to the people in the life of the employee or due to undesirable situations. Wrong people can cause pressure on employee to commit a fraud. Undesirable situations like a financial crunch or huge debt due to addictions/ gambling can also cause an employee to commit a fraud.

3. Rationalization - An irrational attitude can be a cause an employee commits a fraud. An irrational person has justifications to why commit a fraud. A person for the sake of revenge can commit a fraud.

Question 44

1. Lowest tax expense - LIFO

2. Highest net income - FIFO

3. Highest ending inventory - FIFO

4. Most stable earnings - Average cost method