ACCA Strategic Professional · Advanced Audit and Assurance (International) · Fraud and error
During planning for the audit of Delta Retail, the audit team notes that the finance director's bonus depends heavily on reaching a profit target, and that the target is only just achievable. Under ISA 240, which element of the fraud triangle does this situation primarily represent?
It represents incentive or pressure. A bonus linked to a barely achievable profit target gives the finance director a motive to manipulate reported results. Opportunity concerns weak controls or override, rationalisation concerns justifying the act, and detection risk is an audit risk component rather than a fraud triangle element.
- AIncentive or pressureCorrect
- BOpportunity
- CRationalisation
- DDetection risk
Explanation
A bonus tied to a demanding profit target gives management a motive to misstate results. ISA 240 classes this as incentive or pressure. Opportunity would relate to weak controls or management override, and rationalisation to attitudes that justify the act. Detection risk is an audit concept, not part of the fraud triangle.
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