Define fraudulent financial reporting and give two examples that illustrate fraudulent financial reporting.

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Part 1

A.

Fraudulent financial reporting is an intentional misstatement or omission of amounts or disclosures with the intent to deceive users. Two examples include (1) accelerating the timing of recording sales revenue to increased reported sales and earnings, and (2) recording expenses as fixed assets to increase earnings.

B.

Fraudulent financial reporting is fraud that involves theft of an entity's assets. Two examples include (1) the intentional omission of accounts payable and/or other liabilities, and (2) the capitalization of assets that should otherwise be expensed.

C.

Fraudulent financial reporting is fraud that involves theft of an entity's assets. Two examples include (1) an accounts payable clerk issuing payments to a fictitious company controlled by the clerk, and (2) a sales clerk failing to record a sale and pocketing the cash receipts.

D.

Fraudulent financial reporting is an intentional misstatement or omission of amounts or disclosures with the intent to deceive users. Two examples include (1) incentives/pressure, and (2) opportunities.