For each of the following red flags, identify which fraud exposure the risk falls under: management and directors, relationships with others, organization and industry, or financial results and operating characteristics.
1. The personal worth of directors is tied up in the organization.
2. The company has a complex organizational structure.
3. The audit committee rarely holds a meeting.
4. The company has recently switched to a new law firm.
5. Although sales appear to be increasing, the cost of goods sold and inventory levels remain constant.
6. The company is about to go through a debt offering.
7. A background check indicates that the new controller has been fired from five previous jobs.