Which of the following is a red flag indicating fraudulent register disbursements?

• A. Gaps exist in the sequence of transactions on the register log
• B. There is an excessive number of refunds near the review limit
• C. Voided transactions are always documented
• D. All refunds are reviewed by a supervisor

Answer: (A)

In fraud risk for register disbursements, a key red flag is gaps in the transaction sequence. When the register log isn’t a continuous, unbroken series of numbers, it suggests that records may have been omitted or altered to conceal activity. If a disbursement was made but its entry was removed or never recorded, the gap provides a ready-made cover for theft or misappropriation. Sequential numbering and complete logs are basic controls because they make missing or unauthorized transactions easy to spot during reviews.

This is the strongest indicator among the options because it directly points to potential concealment of disbursements. While an unusually high number of refunds near a review limit could raise concern and a sign that warrants investigation, it doesn’t by itself imply deliberate concealment. Documents showing voided transactions are always documented and, in practice, reflect a control to prevent unrecorded disbursements. Likewise, having refunds reviewed by a supervisor indicates strong oversight and reduces fraud risk, not signals it.

If you encounter gaps, follow up by reconciling the register with receipts and cash on hand, and look for missing or inconsistent documentation around those numbers to determine if there’s a genuine discrepancy or a potential fraud issue.