Which of the following could be a red flag indicating financial statement fraud?

Frequent changes in accounting policies can serve as a significant red flag indicating financial statement fraud because such changes may be attempts to manipulate financial results or obscure the true state of the company’s financial health. Companies might alter accounting policies to better match revenue recognition to known helpful metrics or to strategically shift expenses and liabilities to present a more favorable picture of profitability. These alterations may raise concerns about the reliability and consistency of financial reporting, as they can undermine the comparability of financial statements over time and reduce transparency for stakeholders, enabling potential fraudulent activities.

On the other hand, consistent revenue growth typically suggests a robust business model, while high employee satisfaction and low turnover rates generally indicate a positive and stable workplace environment. These factors are often associated with good management practices and reliable operations rather than fraud, making them less likely to raise any significant concerns regarding financial statement integrity.