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Match the continuous auditing alarms to flag the fraud schemes. Fraud Scheme Continuous Auditing Alarms a. Operating expenses were illegitimately i. Generate an alarm if
Match the continuous auditing alarms to flag the fraud schemes.
Fraud Scheme Continuous Auditing Alarms a. Operating expenses were illegitimately i. Generate an alarm if the allowance for reclassified as capital expenditures, which improved the "expenditure-to-revenue" (E/R)the last month's ratio (i.e., to Accounts ratio by reducing the amount of expenses recorded in the current fiscal year. doubtful accounts differs significantly from Receivable). industry averages and generate an alarm ii. Benchmark key ratios (e.g., E/R) against b. Book values of acquired entities were when there is a significant discrepancy illegitimately reclassified as goodwill on the books, which improved the E/R ratio by increasing the effective amortization period i. Create an alarm that identifies increases in of the amounts in question. plant, property, equipment, and goodwill c. Excessively wrote down the assets included that differ significantly from historical in the corporate acquisitions, which gave "the false impression that expenses were iv. Create an alarm that simultaneously declining over time in relation to revenue (i.e., reducing the E/R ratio and increasing identifies (1) reductions in operating expenses that exceed the industry average and (2) increases in capital expenditures that exceed the industry average. d. Allowance for doubtful accounts was underestimated (along with the corresponding expense entry bad debts expense) to falsely improve the E/R ratioStep by Step Solution
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