Certified Internal Auditor (CIA) Part 2: Practice of Internal Auditing — Question 77

Which of the following does not represent a difficulty in using red flags as fraud indicators?

Answer options

• A. Many common red flags are also associated with situations where no fraud exists.
• B. Some red flags are difficult to quantify or to evaluate.
• C. Red flag information is only gathered in extraordinary circumstances.
• D. The red flags literature is not well enough established to have a positive impact on auditing.

Correct answer: D

Explanation

Option D is correct because the literature on red flags is indeed growing and can provide valuable insights for auditing. Options A, B, and C all represent valid challenges in using red flags, as they highlight the complexities and limitations in identifying fraud based solely on these indicators.