Which of the following best represents fraud related to financial reporting?
A)The transfer agent issues 40,000 shares of the company's stock to a friend without authorization by the board of directors.
B)The controller of the company decreases warranty expense by $3 million because the company will otherwise miss analysts' expectations this quarter.
C)The in-house attorney receives payments from the French government for negotiating the development of a new plant in Paris.
D)The accounts receivable clerk covers up the theft of cash receipts by writing off older receivables without authorization.

Question

Quizplus · Accepted Answer

Option B represents fraud related to financial reporting because decreasing the warranty expense by $3 million to meet analysts' expectations is a manipulation of financial statements. This manipulation of financial statements is done to mislead stakeholders about the actual financial health of the company. Options A, C, and D do not specifically represent fraud related to financial reporting.

Which of the Following Best Represents Fraud Related to Financial