Final answer:
A sudden decrease in the accounts payable/inventory ratio is not a symptom of liability fraud, while the others are. Symptoms of liability fraud include lapping, inappropriately capitalizing costs, and an unusual increase in the current ratio.
Step-by-step explanation:
A symptom of liability fraud is when payments made in later periods are recorded as being paid in earlier periods. This is known as lapping, and it is a way to hide the misappropriation of funds. For example, if a payment is due in February but is recorded as being paid in January to cover up missing funds in January, this would be a symptom of liability fraud.
A sudden decrease in the accounts payable/inventory ratio is not a symptom of liability fraud. This ratio measures a company's ability to pay its short-term obligations with its inventory. A decrease in this ratio could indicate that a company is becoming more efficient in managing its inventory.
Inappropriately capitalizing costs that should be expensed is another symptom of liability fraud. This is when expenses that should be recorded as an immediate cost are instead recorded as an asset on the balance sheet. This can be done to inflate a company's assets and misrepresent its financial health.
An unusual increase in the current ratio is also a symptom of liability fraud. The current ratio measures a company's ability to pay its short-term liabilities with its short-term assets. An unusual increase in this ratio could indicate that a company is manipulating its financial statements to make its financial position appear stronger than it actually is.