What Is the Purpose of Fraudulent Reporting

question 15

Multiple Choice

What is the purpose of fraudulent reporting?

• A)Net income and total assets are understated so managers can receive their bonuses.
• B)Net income and total assets are overstated so managers can receive their bonuses.
• C)So the stock price increases and managers benefit from share appreciation of stock held.
• D)B and C

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Definitions:

Production Costs

Expenses directly and indirectly involved in creating a product, including materials, labor, and overhead costs.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a unit of product.

Net Income

The total profit of a company after all expenses, including taxes, have been subtracted from total revenues.

Operating Expenses

Costs associated with running the day-to-day operations of a business, excluding costs related to production or manufacturing.