Which of the following scenarios provides the most concerning red flag or indicator of possible fraud?

Question

Options

• AAn employee receives a bonus for perfect attendance
• BDuring the past 18 months three chief financial officers have left the organization after having
• CThe organization does not perform any due diligence research on third party service providers
• DThree competitors are highly profitable but a fourth equal in size is approaching bankruptcy limits

• A
  8% (4)
• B
  75% (38)
• C
  14% (7)
• D
  4% (2)

Explanation

Rapid, repeated departure of senior financial officers is one of the most significant behavioral red flags in fraud detection. Three CFOs leaving within 18 months strongly suggests an environment where financial leadership is either pressured to participate in misconduct, witnesses irregularities and refuses, or resigns to avoid personal liability - all of which point toward potential fraud at the executive level.

Why the distractors are wrong:

• A - A perfect attendance bonus is a standard, legitimate HR practice with no fraud implications.
• C - Skipping third-party due diligence is a control weakness and compliance gap, but it is an opportunity for fraud rather than an indicator that fraud is actively occurring.
• D - One competitor nearing bankruptcy while others thrive likely reflects poor strategy, market positioning, or management - not fraud. The question asks about the organization being examined, not its competitors.

Memory tip: Use the acronym GONE (Greed, Opportunity, Need, Exposure) to remember fraud pressure points - and think "who guards the money?" When the CFO (the primary financial guardian) keeps leaving at an unusual rate, that is a direct signal that something is wrong with the organization's financial integrity, making it the strongest indicator among the options.

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