Multiple Choice
One of the main disadvantages of the corporate form is the:
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6. Internal Controls and Reporting Cash
Fraud and the Fraud Triangle
Struggling with Financial Accounting?
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Which of the following items on John's credit report would most likely be considered a red flag for potential fraud?
A
A recently opened credit card account that John does not recognize
B
A long-standing mortgage account with regular payments
C
A minor late payment from three years ago on a known account
D
A closed student loan account with a zero balance
Verified step by step guidance1
Step 1: Understand the concept of a credit report and its purpose. A credit report is a detailed record of an individual's credit history, including accounts, payment history, and any potential issues such as fraud or errors.
Step 2: Identify what constitutes a 'red flag' for potential fraud. A red flag typically refers to unusual or suspicious activity that deviates from the individual's known financial behavior or history.
Step 3: Analyze each option provided in the problem. For example, a long-standing mortgage account with regular payments and a closed student loan account with a zero balance are consistent with normal financial activity and unlikely to indicate fraud.
Step 4: Consider the significance of a minor late payment from three years ago. While it may impact credit score slightly, it is not indicative of fraud as it pertains to a known account.
Step 5: Evaluate the recently opened credit card account that John does not recognize. This is the most likely red flag for potential fraud because it suggests unauthorized activity or identity theft, as John is unaware of this account.
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