Which of the following is a true statement regarding searching for Inventory analytical symptoms?
a. Examining the changes in recorded amounts from period to period provides useful information regarding potential fraud.
b. Studying the statement of cash flows is not a useful means of looking for potential fraud.
c. Utilizing vertical analysis for the current year is a useful means of identifying potential fraud.
d. The pace of the change in the numbers can often be indicative of potential fraud.
d
FEEDBACK: a. Incorrect, looking at the financial statement numbers is not effective in looking for potential fraud.
b. Incorrect, the statement of cash flows depicts changes and changes can indicate potential fraud.
c. Incorrect, vertical analysis for the current year is insufficient. The results must be compared to prior years.
d. Correct, horizontal (trend) analysis can show pace and magnitude of change and thus can indicate potential fraud.
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