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

Multiple Choice

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

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

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

Company management falsifies the inventory count, thereby overstating ending inventory and understating cost of sales.