You are assessing the fraud risks at your client,Bourdain Industries,Inc.Which of the following would be considered an example of the opportunity component of the fraud triangle?
A)The company is required by the bank to maintain a debt-to-equity ratio no higher than 2 to 1 and a current ratio of 1.5 or higher.
B)Management's compensation package includes stock options and a bonus tied to company profits.
C)A prevalent sentiment amongst employees is that the company is flush with funds and could easily afford a small loss of assets.
D)The company generates the bulk of its revenues via cash-based transactions and at any one time a high balance of cash is kept on hand.

Question

Quizplus · Accepted Answer

The high balance of cash kept on hand provides an opportunity for employees to potentially steal or misappropriate cash without being detected. This increases the risk of fraud occurring at Bourdain Industries, Inc. Options A and B relate to pressure and rationalization components of the fraud triangle, respectively. Option C is a cultural or behavioral factor but does not directly provide an opportunity for fraud.

You Are Assessing the Fraud Risks at Your Client,Bourdain Industries,Inc