Fraud Related to Revenue Recognition Will Most Likely Be Identified

question 94

Multiple Choice

Fraud related to revenue recognition will most likely be identified by the auditor through which of the following independent situations?

• A) Sales have increased 5% in the current period over the previous period and is consistent with the results of competitors.
• B) Gross margin is equivalent in the current period to previous periods and is below that of the industry.
• C) Sales are higher in the month preceding each quarter end.
• D) The sales of a revolutionary new product are increasing beyond that of the competition in the periods immediately following its introduction.

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Definitions:

Increasing Costs

A situation in which the costs of production increase as the total output increases, often due to factors like labor and material shortages.

Specialization

The practice of focusing on a specific area or activity to achieve greater efficiency and productivity.

Production Possibilities

A graphical representation of the alternative combinations of goods and services an economy can produce when all its resources are fully and efficiently utilized.

Specialize

To concentrate on and become expert in a particular subject or skill.