All of the Following Are Ways to Detect Disclosure Fraud

question 30

Multiple Choice

All of the following are ways to detect disclosure fraud except:

• A) A tip or a complaint
• B) Making inquiries of management regarding related-party transactions, and other liabilities
• C) Identifying inconsistencies between disclosures and information in the financials
• D) Searching for analytical symptoms in the financial statements

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Definitions:

Hindsight Bias

The tendency to overestimate one’s ability to have predicted an event after the outcome is known; the “I knew it all along” phenomenon.

Heuristic

A rule of thumb that suggests a course of action or guides problem solving but does not guarantee an optimal solution.

Cognitive Schema

A mental framework that helps organize and interpret information, based on past experiences and knowledge.

Cognitive Heuristic

Simple, efficient rules which people often use to form judgments and make decisions; they are mental shortcuts that reduce the cognitive load of making a decision.