Identify the True Statement About Detecting Fraud Through Financial Statements

question 48

Multiple Choice

Identify the true statement about detecting fraud through financial statements reports:

• A) To perform horizontal analysis, convert the financial statement balances to percentages of total assets or gross sales.
• B) Vertical analysis is the most direct method of focusing on changes from period to period.
• C) Before performing fraud analysis, all three types of financial statements need to be converted to change statements.
• D) Small frauds usually do not significantly affect the financial statement balance.

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Definitions:

Preemptive Right

The right granted to existing shareholders to purchase additional shares before the company offers them to the public, to maintain their proportional ownership.

Stock-split Right

The entitlement of a shareholder to receive additional shares when a company decides to divide its existing shares into multiple ones to boost liquidity.