Which of the following may indicate management fraud?
A)The name of a relative of a member of upper management is suggested to fill a Board of Directors vacancy.
B)Increases and decreases in inventory fluctuates from period to period.
C)Inconsistencies exist between what management is telling the auditor and what the auditor observes.
D)Several mistakes are discovered in the inventory records.

Question

​Which of the following may indicate management fraud?
A)​The name of a relative of a member of upper management is suggested to fill a Board of Directors vacancy.
B)​Increases and decreases in inventory fluctuates from period to period.
C)​Inconsistencies exist between what management is telling the auditor and what the auditor observes.
D)​Several mistakes are discovered in the inventory records.

Quizplus · Accepted Answer

Inconsistencies between what management tells the auditor and what the auditor observes may indicate that management is intentionally misleading the auditor or hiding information. This is a red flag for possible management fraud. The other options do not necessarily indicate management fraud - A may indicate nepotism, B may be a result of normal business fluctuations, and D may indicate errors or incompetence rather than intentional deceit.

​Which of the Following May Indicate Management Fraud

Which of the Following May Indicate Management Fraud