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.

Question

Quizplus · Accepted Answer

A: Horizontal analysis compares the numbers from period to period, and does not compare the changes within a given period.
B: Horizontal analysis, not vertical analysis, is the most direct method of focusing on changes.
C: The cash flow statement is already a change statement. only balance sheets and income statements need to be converted.
D: Small frauds are detected through source documents or other symptoms because they are usually not large enough to significantly affect the financial statements.

Identify the True Statement About Detecting Fraud Through Financial Statements