Fraud risk factor
A fraud risk factor is an event or condition indicating an incentive or pressure to commit fraud, an opportunity to do so, or an attitude or rationalisation that justifies the fraudulent action. The auditor evaluates these indicators in context under ISA 240 (Revised); a factor can inform the assessment and response but does not establish that fraud occurred.
Worked example
A senior executive’s bonus depends on meeting an aggressive revenue target while year-end sales controls are weak.
Common mistake
Pressure to meet a target alone is not proof of fraud; it is a risk indicator requiring an appropriate response.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AA | Supporting | September 2026–June 2027 |