Which of the following might alert an internal auditor to the possibility of fraud in a division? 1. The division is not scheduled for an external audit this year. 2. Sales have increased by 10 percent. 3. A significant portion of management's compensation is directly tied to reported net income of the division.
A) 1 only
B) 3 only
C) 1 and 2 only
D) 1, 2, and 3

Question

Quizplus · Accepted Answer

A significant portion of management's compensation being tied to reported net income can create an incentive for management to manipulate financial results, which could alert an internal auditor to the possibility of fraud.

Which of the Following Might Alert an Internal Auditor to the Possibility