Question

Which of the following is a valid reason behind the prevalence of revenue-related financial statement fraud?

1) Lack of internal controls
2) Inadequate financial reporting systems
3) Pressure to meet financial targets
4) All of the above

Answer 1

Revenue-related financial statement fraud often results from a combination of lack of internal controls, inadequate financial reporting systems, and pressure to meet financial targets.

Step-by-step explanation:

The prevalence of revenue-related financial statement fraud can be attributed to multiple factors. Lack of internal controls, inadequate financial reporting systems, and pressure to meet financial targets are all valid reasons that can contribute to such fraud.

Companies may face pressure to deliver financial results that meet the expectations of investors or to achieve bonuses tied to financial performance, which can tempt management to manipulate earnings. Additionally, inadequate internal controls can fail to detect or prevent fraudulent activities.

When financial reporting systems aren't robust or efficient enough to provide accurate and timely information, discrepancies and fraudulent activities may slip through the cracks.