A Company Is Concerned That Its Lenders Will Declare the Loans

question 8

Multiple Choice

A company is concerned that its lenders will declare the loans in default if the company reports its true earnings, so management lies and reports high enough earnings to appear to comply with its loan agreements. Which element of the fraud triangle is most clearly involved?

• A) Pressures or incentives
• B) Opportunities to commit fraud
• C) Rationalizations
• D) Sociopathic behavior

---

Definitions:

Truth Table

A logical table that shows the truth-value of a statement formula for every possible combination of truth values for its components.

Symbolic Form

The representation of logical and mathematical expressions through symbols and notation rather than in ordinary language.

Component Statements

The individual statements that make up a more complex statement or argument, often found within logical connectives.

Connective(s)

Logical operators that connect propositions in a logical formula or statements, such as "and," "or," "not."