(A) Fraud experts often say that there are three primary factors that contribute to employee fraud.

Identify the three factors and briefly explain what is meant by each. (5 marks)

(B) Assume the indirect method is used to compute cash flows from operations. For each item

listed below, indicate the effect on net income in arriving at cash flows from operations by

choosing one of the following code letters. (Answer should be in the format 1-A, 2-D etc.) (10

marks)

Code

Cash Flows From Operating Activities

Add to Net Income A

Deduct from Net Income D

1. Increase in accounts receivable

2. Increase in inventory

3. Decrease in prepaid expenses

4. Decrease in accounts payable

5. Increase in accrued liabilities

6. Increase in income taxes payable