Each of the following scenarios is based on facts in actual fraud. Categorize each scenario as primarilyindicating (1) an incentive to commit fraud (2) an opportunity to commit fraud or (3) a rationalization forcommitting fraud. Also state your reasoning for each scenario.a. There was intense pressure to keep the corporation's stock from declining further. This pressurecame from investors, analysts and the CEO, whose financial well-being was significantlydependent on the corporation's stock price.b. Agroup of top-level management was compensated (mostly in the form of stock options) well inexcess of what would be considered normal for their positions in the industry.c. Top management of the company closely guards internal financial information, to the extentthat even some employees on a "need to know basis" are denied full access.d. Managing specific financial ratios is very important to the company, and both management andanalysts are keenly observant of variability in key ratios. Key ratios for the company changedvery little even though the ratios for the overall industry were quite volatile during the timeperiod.e. In an effort to reduce certain accrued expenses to meet budget targets, the CFO directs thegeneral accounting department to reallocate a division's expenses by a significant amount. Thegeneral accounting department refuses to acquiesce to the request, but the journal entry ismade through the corporate office. An accountant in the general accounting department isuncomfortable with the journal entries required to reallocate divisional expenses. He brings hisconcerns to the CFO, who assures him that everything will be fine and that the entries arenecessary. The accountant considers resigning, but he does not have another job lined up and isworried about supporting his family. Therefore, he never voices his concerns to either theinternal or external auditors.f. Accounting records were either nonexistent or in a state of such disorganization that significanteffort was required to locate or compile them.

Fraud refers to when an individual or an entity deceiving others for personal gain. The fraud…

Each of the following scenarios is based on facts in actual fraud. Categorize each scenario as primarily indicating (1) an incentive to commit fraud (2) an opportunity to commit fraud or (3) a rationalization for committing fraud. Also state your reasoning for each scenario.

Each of the following scenarios is based on facts in actual fraud. Categorize each scenario as primarily indicating (1) an incentive to commit fraud (2) an opportunity to commit fraud or (3) a rationalization for committing fraud. Also state your reasoning for each scenario.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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