Fraudulent Revenues

A

The answer to this question is A. Fictitious or fabricated revenues.

Fictitious or fabricated revenues refer to the recording of sales transactions for goods or services that never occurred. In other words, these revenues are entirely made up or fabricated, with no corresponding delivery of goods or services or exchange of cash. Fictitious revenues are a type of fraudulent financial reporting and are typically created to overstate the financial performance of a business, deceive investors, or obtain financing under false pretenses.

Fictitious revenues can be created in several ways, such as by recording sales for goods that were never shipped, services that were never provided, or by inflating the amount of a legitimate sale. One common method of creating fictitious revenues is through the use of false invoices or receipts, which can be created by employees or outside parties with the intent to deceive.

Fictitious revenues are a significant red flag for fraud and should be carefully scrutinized by auditors, accountants, and other financial professionals. There are several common red flags associated with fictitious revenues, including unusually high or consistent sales growth, a lack of supporting documentation for sales transactions, and a high concentration of sales from a small number of customers or transactions.

In summary, fictitious or fabricated revenues involve the recording of sales transactions for goods or services that never occurred. They are a type of fraudulent financial reporting and can be created in several ways, including the use of false invoices or receipts. Fictitious revenues are a significant red flag for fraud and should be carefully scrutinized by financial professionals.