Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 91

Which of the following best describes the misdirection of payments on accounts receivable to an employee's bank account?

Answer options

• A. Fraud open on the books.
• B. Fraud hidden on the books.
• C. Fraud off the books.
• D. Fraud on the balance sheet.

Correct answer: C

Explanation

The correct answer, C, 'Fraud off the books,' refers to transactions that are not recorded in the company’s financial records, making them difficult to detect. Option A, 'Fraud open on the books,' implies that the fraud is visible in the records, while B, 'Fraud hidden on the books,' suggests it's concealed but still recorded. Option D, 'Fraud on the balance sheet,' indicates a misrepresentation on the balance sheet specifically, which does not accurately describe the misdirection of payments to a personal account.