Certified Fraud Examiner Practice Exam 2025 – All-in-One Guide to Master Your Certification!

Discrepancies in daily cash balances serve as a strong indicator of potential skimming activity because skimming involves the theft of cash before it is recorded in the company's accounting system. When cash is skimmed, it creates a gap between the actual cash that should be on hand and what is recorded. Regular checks of daily cash balances can reveal inconsistencies or significant differences from expected amounts.

In this context, if daily cash balances frequently do not match expected totals based on sales and receipts, it raises red flags that suggest that cash may not have been recorded properly, possibly indicating that employees are stealing cash before it is logged into the accounting records.

Other options like increased inventory levels, high employee morale, and regularly met sales targets do not directly indicate skimming. Increased inventory could suggest other operational issues, high employee morale may not correlate with financial mismanagement, and consistently met sales targets may simply reflect a well-performing business rather than an indication of cash theft. Therefore, the presence of discrepancies in daily cash balances is the most telling sign of possible fraudulent skimming activities.