Sam Jones,controller of Mitnikco,spends Three Days Researching the Accounting Standards

question 97

Multiple Choice

Sam Jones,controller of Mitnikco,spends three days researching the accounting standards to find loopholes in the "rules" and to make a case for recognizing revenue earlier,rather than in later years.In the end,Sam and the other members of management determine that they will reduce the company's deferred revenue accounts and begin accounting for all revenues as agreements are signed.Based solely on the preceding information,which element of fraud is represented by the actions of Mitnikco management?

• A)Pressures.
• B)Opportunity.
• C)Rationalization.
• D)Skepticism.

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Definitions:

Profit Margin Ratio

A financial metric that measures the percentage of profit a company earns from its total revenue.

Net Income

The residual income of a business post all deductions, including taxes and expenses, from its gross income.

Net Sales

The total revenue generated from sales activities after deducting returns, allowances, and discounts.

Days' Sales in Inventory

A financial ratio that indicates the average time in days that a company takes to turn its inventory into sales.