Final answer:
The situation that does not inherently increase the opportunity for management to commit fraud is when the auditor's relationship with management is strained. This strain can lead to more vigilant auditing rather than increased opportunities for fraud. Significant related party transactions, management dominance by one individual, and highly subjective estimates in financial statements are all factors that may facilitate fraudulent activity.
Step-by-step explanation:
The question posed relates to the factors that may increase the opportunity for management to commit fraud. In the context of fraud risk factors, some circumstances can heighten the risk of fraud within an organization.
Options such as significant related party transactions, management being dominated by a single person, and the financial statements containing highly subjective estimates are all scenarios that present a higher opportunity for fraudulent activity, as they can allow for manipulation or lack of oversight. However, the scenario where the auditor's relationship with management is strained does not inherently increase the opportunity for management to commit fraud. In fact, a strained relationship might lead to more rigorous auditing and less trust, potentially resulting in a more thorough investigation and lower chances for fraud to go undetected.
Shareholders and bondholders, often not personally acquainted with the management, might provide financial capital to firms based on widely available financial information, but their ability to detect fraud can be limited compared to auditors who scrutinize the company's information. In the United States, the likelihood of being audited has decreased, especially among high-income individuals since the government devoted fewer resources to audits, which may potentially increase opportunity for tax fraud significantly.