When Analyzing Accounts for Fraud Risk

question 46

Multiple Choice

When analyzing accounts for fraud risk,

• A) companies will generally attempt to overstate accounts payable and net income.
• B) the inventory account is generally not susceptible to fraud since the auditor must verify the existence of the inventory.
• C) payroll is rarely a significant risk for fraudulent financial reporting.
• D) fixed assets are rarely stolen because of their large size.

---

Definitions:

Truth In Lending Act

A federal law designed to promote informed use of consumer credit by requiring disclosures about its terms and cost.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money they borrow from a lender.

Credit Transaction

A financial agreement where a buyer receives goods or services with the promise to pay the seller at a future date, typically involving interest or finance charges.

China

A sovereign nation located in East Asia, known for its rich history, cultural heritage, and being the world's most populous country.