Asset Frauds Are Often Easier to Detect Than Liability or Disclosure

question 58

Multiple Choice

Asset frauds are often easier to detect than liability or disclosure frauds because

• A) Overstated assets are always included on the balance sheet while the other frauds are not.
• B) Overstated assets have better document evidence than the other frauds.
• C) Assets can be physically labeled by the employer.
• D) Understated liabilities use a series of smaller entries while the asset frauds do not.

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Definitions:

Interest Tax Shield

The savings in income tax that a company achieves through deducting its interest expense from its taxable income.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital where each category of capital is proportionately weighted.

Capital Structure

The particular combination of debt and equity that a company uses to finance its overall operations and growth.

Financial Risks

The possibility of losing money on an investment or business operation due to market fluctuations, default, or other financial uncertainties.