Question

6. Which of the following best describes the contribution of ratio analysis to a forensic accounting or fraud examination engagement? A. Ratio analysis may provide red flags or symptoms of fraudulent activity. - B. Ratio analysis provides compelling evidence that a fraud has occurred. Ratio analysis is an effective fraud detection tool. D. Ratio analysis is most likely to contribute to internal controls assessment.

Answer 1

DHATI Answer: A of Year A Ratio os analysis tradulent may provide activity. red flags or symplores 73,400 5,670) 2,390 Ratio analysis, in simple terms, relationship two amounts of between financial statements. This form of analysis is very much useful in detecting red flags of fradulent activity Ratio may change significantly over period of years, it may exists there may be a problem. When a change in specific ratio is detected, the appropriate source accounts should be - reviewed to determine whether fraud has - ocurred Examples: D A significant decrease in Current ratio may indicate increase in Current liabilities or reduction in assets, (both of which could be used to veil fraud. 340 оо 2) Employee is accounts, the despnportionately embezzling from the company's amount of cash will decrease and current_ratio will deline: