Should Nonfinancial Indicators Be Used for Assessing Fraud Risk? Why

question 5

Multiple Choice

Should nonfinancial indicators be used for assessing fraud risk? Why or why not?

• A) No. A company's financial statement data need not always be consistent with its nonfinancial measures.
• B) Yes. Management can more easily manipulate financial numbers but finds it harder to keep all the nonfinancial information consistent with the financial information.
• C) No. Nonfinancial measures are indicative of physical assets alone.
• D) Yes. Management attempts to commit fraud first show up in these indicators. Financial statement fraud is an attempt to cover up those attempts.

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Definitions:

Politicians

Individuals engaged in directing or influencing government policy and decision-making.

Short-Run Benefits

Advantages or gains received in the immediate future, often without consideration for long-term implications.

Economic Thinking

The process of making decisions based on the efficient allocation of scarce resources.

Personal Benefits

Are advantages or favorable outcomes that accrue directly to an individual as a result of their actions or decisions.