At the suggestion of the external auditors, the audit committee of Alpha Technologies called in Bryce Miller, CFE, to investigate some suspected improprieties. During his investigation, Bryce learns that the company has been involved in several highly-complex transactions with related parties that do not appear to have any logical business purpose. Further, Alpha's organizational structure is overly complex and involves some unusual legal entities with overlapping lines of authority. Bryce also discovers four large bank accounts in the Cayman Islands that have no clear business justification. When questioned about these situations, the company's CEO treats them as unimportant and refuses to provide any further explanation. What type of financial statement fraud scheme do Bryce's findings most likely indicate?
A) Fictitious revenues
B) Improper asset valuation
C) Improper disclosures
D) Concealed expenses

Question

Quizplus · Accepted Answer

Bryce's findings indicate improper disclosures, as the complex transactions with related parties and unusual legal entities with overlapping lines of authority are not being properly disclosed in the financial statements. The large bank accounts in the Cayman Islands also suggest a lack of transparency and potential hiding of information. The CEO's refusal to provide any further explanation further supports the suspicion of improper disclosures.

At the Suggestion of the External Auditors, the Audit Committee