Multiple Choice
If you make an illegal sale and did not meet the level of care that an ordinary person would exercise in similar circumstances, which element of the fraud triangle does this most directly relate to?
6. Internal Controls and Reporting Cash
Fraud and the Fraud Triangle
Multiple Choice
Which type of fraud arises from peripheral or incidental transactions, rather than from the main operations of a business?
A
Collusion among employees
B
Fraudulent financial reporting
C
Irregularities in non-operating activities
D
Misappropriation of assets
Verified step by step guidance1
Understand the types of fraud listed in the problem: Collusion among employees, Fraudulent financial reporting, Irregularities in non-operating activities, and Misappropriation of assets.
Recognize that the question is asking about fraud arising from peripheral or incidental transactions, which are not part of the main operations of a business.
Define each term: 'Collusion among employees' refers to employees working together to commit fraud, often related to operational activities. 'Fraudulent financial reporting' involves intentional misrepresentation of financial statements, typically tied to the core operations of the business. 'Misappropriation of assets' refers to theft or misuse of company resources, which can occur in both operational and non-operational contexts.
Focus on 'Irregularities in non-operating activities,' which specifically refers to fraud occurring in transactions outside the main operations of the business, such as investments, financing activities, or other peripheral transactions.
Conclude that the correct answer is 'Irregularities in non-operating activities,' as it directly addresses fraud arising from incidental or peripheral transactions rather than the main operations of the business.
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