Which of the following is an example of fraudulent financial reporting?

a. Company management falsifies inventory count tags, thereby overstat- ing ending inventory and understating cost of sales.

b. An employee diverts customer payments to his personal use, concealing his actions by debiting an expense account, thus overstating expenses.

c. An employee steals inventory, and the shrinkage is recorded as a cost of goods sold.

d. An employee borrows small tools from the company and neglects to re- turn them; the cost is reported as a miscellaneous operating expense.