Which of the following is a symptom of potential inventory fraud?
a. an auditor observing a weakness in the inventory-receiving procedures
b. an auditor observing an override of an internal control
c. an auditor observing inadequate physical controls in the warehouse
d. an auditor observing the lack of authorization required for purchases of inventory under $1,000
b
FEEDBACK: a. Incorrect; a control weakness creates an opportunity for fraud but is not a symptom of potential fraud.
b. Correct; an override of an internal control indicates that fraud may have occurred and should be examined.
c. Incorrect; inadequate physical controls in the warehouse is an internal control weakness but not a symptom of a potential fraud occurrence.
d. Incorrect; it is a common practice to allow purchases below set amounts to be made without signed authorization.
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