Question

Which of the following statements is FALSE? a. Liability understatements are easier to detect than other types of financial statement fraud. b. A seasoned fraud examiner will look for unusual liability account changes to detect fraud. c. Companies in trouble have a strong motivation to understate liabilities. d. Analytical symptoms related to accounts payable understatements usually relate to reported balances that appear too low.

Answer 1

Correct option is (a)

Step-by-step explanation:

The statement that liability frauds are easier to detect than any other type of financial statement fraud is false. Asset overstatements or frauds are easier to detect than liability understatement. This is because, overstated assets are reported in the balance sheet while understated liabilities are not reported at all. So, they go undetected. Overstated assets can be analyzed by the investigators by analyzing the assets if they actually exist and if the amounts reported are genuine or not.