Identify the true statement about detecting fraud using financial statement reports.
A) Performing horizontal analysis requires converting the income statement balances into percentages of gross sales.
B) Vertical analysis is the most direct method of focusing on changes from period to period.
C) Before performing any data-driven analysis that targets fraud and corruption in financial statements, the numbers in all three types of financial statements need to be converted to percentages.
D) Small frauds may not affect the summarized financial statements significantly enough to be detected.

Question

Quizplus · Accepted Answer

Small frauds may not significantly affect the summarized financial statements, making it difficult to detect them using financial statement reports. The other statements in the options are incorrect. Performing horizontal analysis does not always require converting income statement balances into percentages of gross sales. Vertical analysis may not always be the most direct method of detecting changes from period to period. Converting the numbers in all three financial statements to percentages is not always necessary before performing data-driven analysis to detect fraud and corruption.

Identify the True Statement About Detecting Fraud Using Financial Statement