What is the easiest way to identify understatement of liability fraud exposures?
A) Analyze the trend of accounts payable for the company
B) By using the formula, assets = capital + liabilities
C) Investigate the various transactions that involve liabilities and can be understated
D) Compare the company's liabilities with those of other players in the industry

Question

Quizplus · Accepted Answer

The easiest way to identify understatement of liability fraud exposures is to investigate the various transactions that involve liabilities and can be understated. This includes examining the company's debt agreements, loans, leases, and other liabilities for any indications of manipulation or fraud. Analyzing trend of accounts payable (A), using the formula assets = capital + liabilities (B), and comparing the company's liabilities with those of other players in the industry (D) may provide some insight but are not as effective as investigating specific transactions related to liabilities.

What Is the Easiest Way to Identify Understatement of Liability