When using ratios to discover financial statement fraud, what is typically the most important aspect to evaluate?
a. The size of the ratio
b. The direction of the ratio
c. The change in the ratio
d. The complexity of the ratio
c
FEEDBACK: a. Incorrect.
b. Incorrect.
c. Correct. When using ratios to discover financial statement fraud symptoms, remember that the size or direction of the ratio is usually not important; rather, the changes (and speed of changes) in the ratios are what signal possible fraud—especially when the change is unexpected or unexplained.
d. Incorrect.
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