Identify the true statement about detecting fraud using financial statement reports
a. Performing horizontal analysis requires converting the Income statement balances to percentages of gross sales.
b. Vertical analysis is the most direct method of focusing on changes from period to period.
c. Before performing any data-driven analysis that targets fraud and corruption in financial statements, the numbers in all three types of financial statements need to be converted to percentages.
d. Small frauds may not affect the summarized financial statements significantly to be detected.
d
FEEDBACK: a. Incorrect. Horizontal analysis compares the numbers from period to period, and does not compare the changes within a given period.
b. Incorrect. Horizontal analysis, not vertical analysis, is the most direct method of focusing on changes.
c. Incorrect. The cash flow statement is already a change statement. Only balance sheets and income statements need to be converted.
d. Correct. Small frauds are detected through source documents or other symptoms because they are usually not large enough to significantly affect the financial statements.
You might also like to view...
A small perfume sample placed in a magazine is a:
A) direct sampling program B) response sampling program C) media sampling program D) selective sample program
Which of the following benefits is offered by the Internet channel?
A. Less perceived risk B. Deeper assortments C. Personal service D. Social interaction E. Immediate gratification
Under an effective system of internal control, errors occur only as a result of fraud or dishonesty
Indicate whether the statement is true or false
Recently, ________ became the first country to legalize child labor from the age of 10.
A. Colombia B. Ecuador C. Peru D. Bolivia