When Using Red Flags as a Basis for Further Investigation

question 28

Multiple Choice

When using red flags as a basis for further investigation:

• A) each fraud will have some unique attributes.
• B) each fraud has common elements making identification easier.
• C) red flags prove of very limited value due to their massive number in day-to-day operations.
• D) All of the choices are correct.

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Definitions:

Reversed

In accounting, referring to the action of negating a previous transaction or entry to correct or adjust financial records.

Accrual Basis

An accounting method where income and expenses are recorded when they are earned or incurred, regardless of when the cash transactions occur.

Insurance Expense

The cost incurred by a business for its insurance policies, which is recorded as an expense on the income statement.

Prepaid Insurance

An asset account that represents payments made in advance for insurance services, which are expensed over the period the insurance coverage is applicable.