CFE – Financial Transactions and Fraud Schemes — Question 38

When an employee processes a fictitious refund of goods, the victim company’s inventory is overstated.

Answer options

• A. True
• B. False

Correct answer: A

Explanation

The correct answer is A because processing a fictitious refund results in the recorded inventory being higher than it actually is, as the goods are considered returned without being physically returned. Option B is incorrect because it suggests that the inventory would not be overstated, which contradicts the scenario described.