Should Nonfinancial Indicators Be Used for Assessing Fraud Risk? Why

question 5

Multiple Choice

Should nonfinancial indicators be used for assessing fraud risk? Why or why not?

• A) No. A company's financial statement data need not always be consistent with its nonfinancial measures.
• B) Yes. Management can more easily manipulate financial numbers but finds it harder to keep all the nonfinancial information consistent with the financial information.
• C) No. Nonfinancial measures are indicative of physical assets alone.
• D) Yes. Management attempts to commit fraud first show up in these indicators. Financial statement fraud is an attempt to cover up those attempts.

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Definitions:

Free Associate

A psychoanalytic technique where a patient is asked to share thoughts, words, or images as they come to mind, without censorship or selection.

Psychoanalysis

A therapeutic technique and theory of psychopathology, originating with Sigmund Freud, focused on unconscious motives and conflicts.

Freud

A reference to Sigmund Freud, emphasizing his contributions to understanding the human psyche, particularly through concepts like the unconscious mind.

Psychotherapy

A therapeutic treatment by psychological means, aiming to assist individuals understand and resolve their psychological issues.