Which of the Following Best Represents Fraudulent Financial Reporting

question 66

Multiple Choice

Which of the following best represents fraudulent 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.

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Definitions:

Gain On Sale

The profit realized from the sale of an asset when the selling price exceeds its book value.

Indirect Method

A method for creating the cash flow statement that involves modifying net income based on balance sheet account variations to compute the operating activities' cash flow.

Accounts Receivable

Money owed to a company by its customers for products or services that have been delivered but not yet paid for.

Accrued Liabilities

Expenses that have been incurred but not yet paid, recognized on the balance sheet for financial reporting purposes.