Which of the following signals a potential fraud that may cause the overstatement of inventory accounts?
A)Reserves for contingencies are reducing rapidly.
B)Inventory amounts are growing faster than sales.
C)Repairs and maintenance accounts have significant credit entries.
D)The purchase of manufacturing equipment is occurring at a rapid rate.

Question

Quizplus · Accepted Answer

If inventory is growing faster than sales, it may indicate that the company is overvaluing its inventory or not properly accounting for and reducing obsolete or damaged inventory. This can lead to an overstatement of inventory accounts and potentially fraudulent financial reporting.

Which of the Following Signals a Potential Fraud That May