What is a common method used to conceal fraudulent activities?

Creating fictitious transactions is a common method used to conceal fraudulent activities. This approach involves fabricating transactions that do not actually occur, thereby misleading stakeholders about the true financial state of an organization. These fictitious entries can manipulate financial statements to hide losses, inflate revenues, or misrepresent assets and liabilities. By creating a false narrative through these transactions, individuals can obscure their fraudulent activities and evade detection from auditors, regulators, and other oversight mechanisms.

In contrast, thorough documentation, regular audits, and transparent financial reporting are practices designed to promote accuracy and accountability in financial reporting. They act as deterrents against fraud by establishing frameworks for oversight and verification, making it more difficult for fraudulent activities to go unnoticed.