Fraud Examination 4th Edition by Steve Albrecht,Chad Albrecht,Conan Albrecht ,Mark Zimbelman

Exercise 116

Identify which ratio is correctly linked to the information it could reveal about the company's potential for revenue fraud.
A) Gross profit margin-this ratio will increase if management overstates inventory.
B) Sales return percentage-a sudden decrease in this ratio can mean that customer discounts are not being recorded in the accounting records.
C) Allowance for uncollectible accounts as a percent of receivables-when a company records fictitious receivables, this ratio increases.
D) Operating profit margin-a dramatic decrease in this ratio could indicate fraud.