Which of the following can be a red flag for employee-level embezzlement?

Unexplained discrepancies in financial reports serve as a significant red flag for employee-level embezzlement due to their potential indication of fraudulent activity. When there are inconsistencies in financial statements or reports that cannot be readily explained, it raises concerns about the integrity of the financial data. Such discrepancies may suggest manipulation or misappropriation of funds, as employees in positions of trust may exploit these opportunities to engage in embezzlement.

In contrast, increased office morale, regular maintenance of employee databases, and effective employee communication are not inherently indicative of embezzlement. These factors may reflect a healthy work environment and good organizational practices rather than signs of fraudulent behavior. Therefore, focusing on unexplained discrepancies in financial reports is crucial in identifying potential embezzlement risks within an organization.