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Question

The risk of management fraud increases in the presence of __________________.


A
Frequency changes in supplies
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B
Improved internal control system
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C
Substantial increases in sales
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D
Management incentive system based on sales done in a quarter
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Solution

The correct option is D Management incentive system based on sales done in a quarter
If management incentive system is based on sales done in a quarter, it may open many doors to manipulation into showing increased sales done during the quarter and that in turn increases the chances of management fraud.
Hence, incentive system should be based on other factors than just Sales.  

Business Studies

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