Which of the following is an example of fraudulent financial reporting?
A)Company management falsifies inventory count tags thereby overstating ending inventory and understating cost of goods sold.
B)An employee diverts customer payments to his personal use,concealing his actions by debiting an expense account,thus overstating expenses.
C)An employee steals inventory and the "shrinkage" is recorded in cost of goods sold.
D)An employee "borrows" tools from the company and neglects to return them;the cost is reported as a miscellaneous operating expense.

Question

Quizplus · Accepted Answer

Falsifying inventory count tags in order to overstate ending inventory and understate cost of goods sold is an example of fraudulent financial reporting. The purpose would be to make the company appear more profitable than it actually is. The other options describe examples of asset misappropriation, not fraudulent financial reporting.

Which of the Following Is an Example of Fraudulent Financial