Reference no: EM131773008

1. An accountant at ABC Corp. tells you that she plans to do a preliminary analysis of a company's quarterly revenue figures for the past 5 years using Benford's law to see if a potential fraud has taken place. She asks for your opinion. You would respond by saying:

a. "It's the best idea I've ever heard in a long time! You should go ahead and do that!"

b. "That's a good idea, but you should be careful because you should speak with Dr. Benford first about whether he's okay with you using his formulas. If you don't, he may do an analysis of your financial information as a punishment."

c. "You should not use Benford's law because revenue numbers are not very random and there aren't enough data points"

d."You should not use Benford's law here because the statistical distribution assumptions that Benford used in his formulas do not apply to accounting numbers in general."

2. One of the reasons for the collapse of Enron was that its balance sheet was burdened with exaggerated asset values that were required by its choice to use operating leases to accounts for their heavy equipment.
a. True
b. False
c. Neither because Enron did not have any assets