A Company Manager Intentionally Commits Fraud by Overstating the Ending

question 5

Multiple Choice

A company manager intentionally commits fraud by overstating the ending balance of inventory in order to improve his current period's performance evaluation and resulting bonus.Which of the following statements is true?

• A)All accounting frauds do not require repeated misrepresentation period after period and the overstatement of income in one period does not cause a lower income in a subsequent period.
• B)All accounting frauds do not require repeated misrepresentation period after period and the manager will most likely escape detection if internal controls are poor.
• C)All accounting frauds require repeated misrepresentation period after period or else the overstatement of income in one period causes a lower income in a subsequent period.
• D)According to Generally Accepted Auditing Standards,the independent auditors must report all accounting frauds,regardless of amount,directly to the Securities and Exchange Commission within 3 days of discovery.

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Definitions:

Merchant Wholesalers

Businesses that buy goods in large quantities from producers to resell to retailers or other businesses, but not to end consumers.

Independently Owned

Refers to businesses or properties that are owned and operated by individuals or entities, not part of larger corporate groups or franchises.

Full-Line Wholesalers

Businesses that provide a complete range of goods within a specific sector.

Channel Functions

The roles and activities performed by intermediaries within a distribution channel to move products from producers to consumers.