Financial Statement Fraud Is Considered When Someone Knowingly Makes Material

question 25

Multiple Choice

Financial statement fraud is considered when someone knowingly makes material misrepresentations of fact with the intent of making someone believe the falsehood and suffer a loss as a result of acting upon that falsehood. Which of the following would be considered fraud?

• A) Increasing the returns allowance as a result of unusually high sales near year end.
• B) Transferring non-performing assets at historical values to a non-consolidated subsidiary.
• C) Employee theft from petty cash.
• D) Purchasing several months' supply of office supplies in order to qualify for a large volume discount.

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Definitions:

Predetermined Overhead Rates

Rates used to apply manufacturing overhead to products that are calculated in advance based on estimated costs and activity levels.

Ending Inventory

is the total value of goods available for sale at the end of an accounting period, after accounting for sales and additions during the period.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and stockholders' equity at a specific point in time.

Job Cost Accuracy

The precision with which the actual costs of a particular job or project match the estimated costs.