Deciding to Not Prosecute a Fraud Perpetrator Should Be a Possibility

question 18

Multiple Choice

Deciding to not prosecute a fraud perpetrator should be a possibility when:

• A) The perpetrator sincerely apologizes and pays back management the entire amount that he or she fraudulently took.
• B) The company the perpetrator stole from is so small that it would not be cost-effective to hire a lawyer.
• C) Top management has taken care of the issue privately, and the perpetrator has been fired.
• D) Deciding not to prosecute should never be a possibility.

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Definitions:

Equity Method

An accounting technique used to assess the profits earned by a company through its investment in another company, recognizing income or loss in proportion to its ownership share.

Consolidated Current Liabilities

The combined total of all short-term financial obligations and debts of a parent company and its subsidiaries, due within one year.

Excess Consideration

The amount paid by an acquiring company over and above the fair value of the net identifiable assets of the acquired company, often recorded as goodwill.

Underlying Book Value

The net asset value of a company calculated by total assets minus intangible assets (patents, goodwill) and liabilities.