Final answer:
The circumstances that often contribute to employee incentives to misappropriate assets are financial distress or personal financial difficulties, as they can create a motive to steal. Positive work conditions and strong internal controls act as deterrents, not incentives.
Step-by-step explanation:
The statement that describes circumstances that underlie employee incentives to misappropriate assets is C) Financial distress or personal financial difficulties. This situation presents a motive for individuals to engage in theft or embezzlement as a way to alleviate their financial problems. It contrasts with other options such as strong ethical values, adequate internal controls, and positive work environments, which are actually factors that deter asset misappropriation.
Instances where oversight is lacking, exemplified by bureaucracies that resist internal criticism, can sometimes contribute to an environment where asset misappropriation is easier to execute, as individuals may feel that the risk of detection is low. Moreover, when employees face accusations like theft or feel unfairly treated, they might rationalize misappropriation through appeals to higher authority, justifying their actions by claiming a dire financial need or a noble cause, despite the inherent ethical issues.