Unusually High Incidence of Returns and Allowances Scheme

C

The correct answer for the question is option C, Returns and allowances.

Returns and allowances scheme is a type of fraud in which an employee or an accomplice deliberately inflates the number or amount of returns or allowances in order to obtain cash or credit for merchandise that was not actually returned or allowed. In order to detect this type of fraud, the accounting records of the organization need to be scrutinized.

One common approach to detect a returns and allowances scheme is to search for an unusually high incidence of returns and allowances compared to industry benchmarks or historical data. This search can be conducted by reviewing the Returns and Allowances account in the general ledger and analyzing it for any unusual trends or patterns.

Option A, Allowances by vendors, refers to a search for any vendor allowances that are provided by suppliers to incentivize the purchase of their products. This search is not directly related to the detection of a returns and allowances scheme.

Option B, Disposals of allowances than reorders, refers to a search for any discrepancies between the number of allowances that have been disposed of and the number of allowances that have been reordered. This search is also not directly related to the detection of a returns and allowances scheme.

Therefore, the correct answer is option C, Returns and allowances, as it is a direct search for detecting the incidence of a returns and allowances scheme.