Detecting Accounting Fraud 1st Edition by Cecil Jackson

Exercise 40

Jay Company sells $100,000 of its accounts receivable. To test whether any of the signals of overstatement of sales are present, it will be necessary to: (a) Add $100,000 back to its accounts receivable amount before calculating its accounts receivable as a percentage of sales.
(b) Add $100,000 to both its accounts receivable and its sales amounts before calculating its accounts receivable as a percentage of sales.
(c) Add $100,000 to its CFFO before comparing CFFO to operating income.
(d) Deduct $100,000 from both its CFFO and its operating income before comparing them to each other.