the book is Fundamental Financial Accounting Concepts.

Review Problem 2-44A in the text.

The three elements that the auditing profession typically sees when fraud occurs are:

1. Opportunity;

2. An incentive to commit fraud to relieve some other pressure or achieve a goal; and,

3. The ability to rationalize the fraudulent act.

See page 95 in the text for a fuller explanation of these elements.

Discuss how these three elements led to the behavior of Pete Chalance and what steps you would take to prevent this behavior.