Which of the following is a red flag associated with fictitious revenues?
A) An unusual decrease in gross margin
B) An unusual decline in the number of days' purchases in accounts payable
C)Several unusual and highly complex sales transactions recorded close to the period end
D) Recurring losses while reporting increasing cash flows from operations

Question

Quizplus · Accepted Answer

Fictitious revenues are often recorded through unusual and highly complex sales transactions that occur close to the period end. This allows the company to inflate its revenue figures without detection. An unusual decrease in gross margin or an unusual decline in the number of days' purchases in accounts payable may be red flags for other types of accounting fraud, but are not necessarily indicators of fictitious revenues. Recurring losses while reporting increasing cash flows from operations may also be a red flag for financial fraud, but again, it is not specifically associated with fictitious revenues.

Which of the Following Is a Red Flag Associated with Fictitious