Which of the Following Would Be Considered Financial Statement Fraud

question 57

Multiple Choice

Which of the following would be considered financial statement fraud (knowingly making 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) ?

• 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:

Outstanding Shares

The total number of shares of a corporation's stock that are currently owned by all shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Stock Split

An action by a company to divide its existing shares into multiple shares to boost the liquidity of the shares, although the overall value of the company does not change.

Market Value

The current price at which an asset or service can be bought or sold in an open market.

Treasury Stock

Shares of a company's own stock that it has reacquired from shareholders and held in the company's treasury, reducing the amount of outstanding stock.