Which of the following is NOT helpful in detecting inadequate disclosure fraud?
a. A tip or a complaint.
b. Making inquiries of management regarding related-party transactions, contingent liabilities and contractual obligations.
c. Looking for inconsistencies between disclosures and information in the financial statements and other information available.
d. Searching for analytical symptoms in the financial statements.
d
FEEDBACK: a. Incorrect. Disclosure frauds are harder to find than other frauds. In fact, without a tip or complaint, it is difficult to know that disclosure fraud is even occurring.
b. Incorrect. Making inquiries is a way to detect disclosure fraud. Even though some of these inquiries may be routine or involve basic questions, differences in responses may tip you off that management is engaging in fraudulent activities.
c. Incorrect.
d. Correct. Because no financial statement impact occurs with inadequate disclosure fraud, analytical symptoms will not be present.
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