(Auto-Graded) Professional Application, Question 3.8 Your answer is incorrect. Try again. Francine Rideau, controller of Quatco Company, is reviewing the year-end financial statements with Tonya Kowalski, the company president. The financial statements currently report a net income of $563,480. Tonya is applying for a very substantial bank loan for a plant expansion, and thus would like to report a net income of at least $700,000. Toward this end, Tonya suggests accruing several sales based on orders received, even though the goods will not be shipped until after year end, and thus they are technically sales of the following year. She said, "If we record sales revenue for these two large orders, our net income should be more than $700,000. This should not be a problem, as we will never notice the loss of these sales next year, since our sales revenue will dramatically increase once the expanded plant is in place." Which of the following accurately describes this scenario as it relates to the fraud triangle? The fraud opportunity is the application for the substantial bank loan. The fraud rationalization is that the bank will be willing to give Quatco a loan if net income is over $700,000. The fraud pressure is the fact that the company needs the bank loan to expand. The attitude "we will never notice the loss of these sales next year, since our sales revenue will dramatically increase once the expanded plant is in place" is the rationalization for the fraud. The fact that the president has the ability to record revenue this year is the opportunity for fraud. The rationalization to justify the fraud is the ability Francine has to override internal controls and record revenue this year. Click if you would like to Show Work for this question: Open Show Work