Fraud Detection Quiz

True or False: A company's inventory turnover ratio significantly decreases without a valid explanation or corresponding change in sales may indicate inventory manipulation or fraud.

• True

• False

True or False: A manager who frequently refuses to provide supporting documents for transactions or justifies delays in reporting financial information could be a red flag for fraudulent activity.

• True

• False

True or False: A sudden and unexplained increase in revenue, especially towards the end of the fiscal year, without supporting documentation or sales, could indicate fraudulent revenue recognition.

• True

• False

True or False: If employees consistently bypass internal controls, such as approving their own expense reports, this is likely a sign of collusion or misappropriation of assets.

• True

• False

True or False: A high volume of round-dollar transactions or transactions with unusual amounts that do not align with normal business practices could signal fraud.

• True

• False

True or False: A company that reports large profits while its cash flow is consistently negative might be manipulating financial results, but it is not necessarily fraud.

• True

• False

True or False: Management repeatedly refuses to disclose details about certain transactions or declines to provide supporting documents for audit inquiries may indicate fraudulent financial reporting.

• True

• False

True or False: An employee is able to override system-generated alerts and access sensitive financial data without supervision. This is a standard practice in most companies and should not raise concerns.

• True

• False

True or False: If an auditor detects discrepancies in financial records but the company's management is cooperative and immediately corrects the errors, it is unlikely to be fraud.

• True

• False

True or False: A company with a history of late filings of financial statements, constant changes in accounting policies, and unexplained variances between reported earnings and cash flow might be engaging in fraudulent activities.

• True

• False