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 inventor 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 is a form of fraudulent financial reporting as it can lead to overstatement of ending inventory and understatement of cost of goods sold, thus inflating profits.

Which of the Following Is an Example of Fraudulent Financial