Question

Fraud examiners must be able to recognize signals that a journal entry may have been manufactured to conceal a fraud. Which of the following is a common journal entry fraud symptom?

Answer 1

Answer:

These are the options for the question:

• a. Journal entries with documentary support.
• b. Journal entries that balance.
• c. Adjustments to receivables or payables that are made monthly.
• d. Journal entries made near the end of an accounting period

And this is the correct answer:

• d. Journal entries made near the end of an accounting period

Explanation:

Hastily made journal entries at the end of the accounting period can be either a sympton of poor firm organization in the accounting department, or more often, a sign of fraud. During this period, common accounting frauds such as capitalization of repair costs as fixed assets, or out-of-period revenue recording can be commited.

The other three options are not indicative of fraud by any means.

Journal entries must balance according to the double entry principle, and they must have documentary support. And in accrual-basis accounting, payables and receivables have to be adjusted constantly.