Final answer:
Managers who receive bonus payments based on the strength of the company's reported profits may be incentivized to commit fraud.
Step-by-step explanation:
An incentive to commit fraud may be caused by managers who receive bonus payments based on the strength of the company's reported profits.
When managers are incentivized with bonus payments tied to the company's reported profits, they have a personal stake in ensuring that the company's financial performance appears strong. This may lead them to engage in fraudulent activities, such as manipulating financial statements, to inflate the reported profits and increase their bonus payments.
For example, a manager may intentionally overstate the company's revenues or understate its expenses to make the profits seem larger. This fraudulent behavior can have serious consequences for the company and its stakeholders.