Question

Weak internal controls Unrealistic internal budgets Unrealistic expectations *All of the above (all of the above are factors that contribute to fraudulent financial reporting)

Answer 1

Factors such as weak internal controls, unrealistic internal budgets, and unrealistic expectations contribute to fraudulent financial reporting, fostering an environment where fraud is more likely to happen.

Step-by-step explanation:

The student's question relates to factors that contribute to fraudulent financial reporting. Fraudulent financial reporting can occur when there are weak internal controls within a company, which means that the processes and procedures that are supposed to prevent fraud are either not strong enough or are not enforced properly. When internal budgets are unrealistic, it may put undue pressure on employees to meet these targets, through legitimate means or otherwise. Similarly, unrealistic expectations by management or shareholders can drive employees to manipulate financial results to meet these goals, leading to fraud. All these issues, individually or combined, create an environment where fraudulent financial reporting is more likely to occur.