Inventory Fraud Often Involves Overstating Inventory And/or Understating Cost of Goods

question 24

Multiple Choice

Inventory fraud often involves overstating inventory and/or understating cost of goods sold. The result is a decrease in the:

• A) gross profit ratio.
• B) inventory turnover ratio.
• C) number of days sales in inventory.
• D) accounts receivable turnover ratio.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.