ACCA Applied Skills · Corporate and Business Law (Global) · Fraudulent and criminal behaviour
Dana, a finance director, knowingly signs financial statements that overstate revenue so that the company's share price rises and investors buy shares in reliance on them. Which description best fits her conduct?
Dana's conduct is fraud, or fraudulent misrepresentation. She knowingly published false revenue figures intending investors to rely on them and buy shares. Deliberate dishonesty for gain distinguishes fraud from innocent misrepresentation or a simple breach of contract.
- AFraudulent misrepresentation or fraud, because she deliberately deceived investors for gainCorrect
- BA mere breach of contract, because no criminal intent is involved
- CInnocent misrepresentation, because the statements were made in the course of business
Explanation
Fraud involves a deliberate false statement, or a reckless one, made to deceive another, and it causes loss or gain. Dana knew the revenue was overstated and intended investors to rely on it. Innocent misrepresentation requires an honest belief in the statement, which is absent here.
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