Question

Explain the link between the opportunity to commit fraud and corporate governance systems.

Answer 1

Corporate governance :

Corporate governance is the system of rules, practices and processes by which a firm is directed and controlled. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community.

There are three fraud risk factors namely :

1.pressure

2.opportunity

3.preformace linked incentive

It is hard to detect the management fraud than employee fraud,

It is hard to detect the fraud than error

When governance systems in the organization fails,

There arises the opportunity to conduct frauds to get personal benefits or to deceive the organization viability.

Hence , the policies and procedures in the organization should be well designed and to be communicated properly to all in the organization .