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:

EMG

Electromyography is a diagnostic method used for evaluating the condition of muscles and the nerve cells responsible for their control.

Motor Unit Recruitment

The process by which different motor units are activated to increase muscle tension and achieve graded contractions.

Abductive Reasoning

A form of logical reasoning that starts with an observation or set of observations then seeks to find the simplest and most likely explanation.

Deduction

The process of reasoning from general principles to specific cases, or the subtraction of expenses from income to determine taxable income.