When testing for fraudulent hours or fraudulent expense reports
A) it is easy for the auditor to discover fraudulent hours because of the abundance of available evidence.
B) it is difficult to prevent fraud in these two areas with adequate internal controls.
C) management falsification of expense reports can be an indicator of disregard for internal controls and the potential for fraud in other areas.
D) examining payroll records for approval is an important substantive test of transactions to uncover fraudulent hours.

Question

Quizplus · Accepted Answer

Management falsification of expense reports can indicate a disregard for internal controls and a potential for fraud in other areas, making it important to investigate further. While it may be difficult to prevent fraud in these areas entirely, adequate internal controls and substantive testing can help uncover any fraudulent activity. It is not necessarily easy for auditors to discover fraudulent hours, and examining payroll records is only one potential test for uncovering fraud in this area.

When Testing for Fraudulent Hours or Fraudulent Expense Reports