Which of the Following Fraudulent Activities Most Likely Could Be

question 1030

Multiple Choice

Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle?

• A) Fictitious transactions may be recorded that cause an understatement of revenues and overstatement of receivables.
• B) Claims received from customers for goods returned may be intentionally recorded in other customers' accounts.
• C) Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash.
• D) The failure to prepare shipping documents may cause an overstatement of inventory balances.

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Definitions:

Overstated

When financial information is reported to be higher than it actually is, often leading to a misrepresentation of a company's financial position.

Dollar-Value LIFO

An inventory valuation method that uses the last-in, first-out principle but accounts for changing prices in dollar terms.

Inventory Information

Crucial data about the products that a company holds for sale, including quantities, locations, and values, essential for effective inventory management.

Price Index

A price index measures the average change over time in the prices paid by consumers for a market basket of consumer goods and services.