Which relationship might suggest a heightened risk of fraud in the acquisition and payment cycle?
A)Unexpected increases in the number of suppliers.
B)A reduction in raw material costs.
C)Maturing capital assets with no plan for replacement.
D)Sales expenses growing in proportion to sales revenue.

Question

Quizplus · Accepted Answer

A sudden increase in the number of suppliers could indicate that the company is not properly vetting their suppliers or is intentionally creating fictitious suppliers to divert funds to themselves through fraudulent invoices.

Note: The other options do not necessarily suggest a heightened risk of fraud in the acquisition and payment cycle. A reduction in raw material costs could indicate negotiating better prices or finding more efficient suppliers. Maturing capital assets with no plan for replacement could suggest a potential issue in the depreciation and capitalization process but does not necessarily indicate fraud in the acquisition and payment cycle. Sales expenses growing in proportion to sales revenue could be a legitimate business expense.

Which Relationship Might Suggest a Heightened Risk of Fraud in the Acquisition