What is the easiest way to identify understatement of liability fraud exposures?
A)Analyze the trend of accounts payable for the company.
B)By using the formula,assets = capital + liabilities.
C)Identify the various transactions that involve liabilities and can be understated.
D)Compare the company's liabilities with those of other players in the industry.

Question

Quizplus · Accepted Answer

The easiest way to identify understatement of liability fraud exposures is to identify various transactions that involve liabilities and can be understated. This can include understating the amount of a loan, failing to record liabilities, or not accruing for expenses. Analyzing the trend of accounts payable or comparing the company's liabilities with those of other players in the industry may also be helpful, but not as specific as identifying potential transactions that could be understated. Using the formula assets = capital + liabilities is not relevant in identifying fraud exposures.

What Is the Easiest Way to Identify Understatement of Liability