What might indicate a higher risk of fraud within a company?

A higher risk of fraud within a company is often indicated by weak internal controls and the ability of management to override these controls. This situation creates an environment where opportunities for fraudulent activities are more likely to occur. When internal controls are inadequate, they fail to prevent, detect, or address potentially fraudulent actions, making it easier for individuals within the company to manipulate financial information or assets without detection.

Additionally, when management can override internal controls, it raises concerns because it suggests that there are potential gaps in the oversight and ethical standards governing the organization. This lack of oversight can enable management or employees to engage in misconduct without fear of repercussions. Strong internal controls and a culture of accountability are integral to mitigating the risk of fraud, and the absence of these factors significantly heightens the vulnerability of a company to fraudulent activities.