Which statement is true about the relationship between growth and fraud risk in organizations?

The statement that rapid growth can increase fraud risk is accurate due to several underlying factors associated with how organizations operate during periods of expansion.

When a company experiences rapid growth, it often faces increased pressure to maintain performance and meet stakeholder expectations. This pressure can lead to a variety of scenarios that may encourage unethical behavior, including the manipulation of financial statements to present a more favorable picture of the company’s performance. Additionally, rapid growth may strain existing controls and processes, creating opportunities for fraudulent activities to occur unnoticed.

Furthermore, organizations might experience a swift increase in the volume of transactions and interactions with new and potentially unvetted employees, suppliers, or partners. This expansion can dilute oversight and make it more challenging to monitor and enforce compliance effectively.

In periods of rapid growth, there may also be a focus on meeting immediate targets, which might overshadow the importance of maintaining robust internal controls and ethical standards. The combination of these factors inherently raises the risk of fraud, making this statement the most accurate about the relationship between organizational growth and fraud risk.