According to the text, why is the accounts receivable turnover ratio widely used in analyzing revenue-related fraud?
a. Significant amounts of fictitious revenues and receivables will almost always affect this ratio except in rare cases.
b. Adding fictitious receivables will generally decrease the number of days it takes to collect receivables.
c. If the ratio generally exceeds 1, recording fictitious sales will significantly increase the ratio, making it easy to spot fraud.
d. Since the ratio should ideally equal to 1, any deviation from this number is easy to detect.
a
FEEDBACK: a. Correct. Historically, this ratio has been used to examine the efficiency with which receivables are being collected. This ratio is also an excellent analytical tool for identifying fraud symptoms.
b. Incorrect. Adding fictitious receivables will generally increase the number of days it takes to collect receivables. The relevant ratio here is number of days in receivables.
c. Incorrect. If the ratio generally exceeds 1, recording fictitious sales will decrease the ratio.
d. Incorrect.
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