Final answer:
The highest risk of fraud is associated with inadequate segregation of duties, as it allows an employee to perpetrate and hide fraudulent activities. Other factors like being a multinational, dealing with related parties, or having inadequate training pose risks, but not to the extent of poor segregation.
Step-by-step explanation:
When considering the risk of fraud, auditors tend to focus on certain red flags that might indicate a higher chance of misappropriation of assets. Of the options provided, inadequate segregation of duties is most typically associated with a high risk of fraud. This is because, when an employee has the ability to both perpetrate and conceal theft, it becomes much easier for them to engage in fraudulent activities without detection. In an organization where duties are not properly segregated, there is an increased chance that an individual can manipulate records and control over assets to cover up illicit actions.
In contrast, being a multinational company, having transactions with related parties, or having inadequate employee training may also present risks, but these do not directly create opportunities to both commit and conceal a fraud like the lack of segregation of duties does. It's important to note that while the chance of tax audits in the United States may have decreased over time, especially for high-income individuals due to fewer government resources being devoted, the internal audit processes within a company are distinct and focus on the company's policies, controls, and activities to prevent and detect fraud within the organization.