ACCA Applied Knowledge · Business and Technology · Regulation and financial crime
Which of the following is an example of fraudulent financial reporting, as distinct from misappropriation of assets?
Recording fictitious sales at the year end to meet profit targets is fraudulent financial reporting, because it deliberately misstates the financial statements to mislead users. Stealing inventory, pocketing receipts and false expense claims are all misappropriation of assets, where assets are taken rather than the reports being manipulated.
- AAn employee stealing inventory from the warehouse
- BA cashier keeping customer receipts and not recording the sales
- CManagement recording fictitious sales at the year end to meet profit targetsCorrect
- DA manager claiming personal expenses as business travel
Explanation
Fraudulent financial reporting is the deliberate misstatement of financial statements, such as inflating revenue, to deceive users. The other options are theft or misuse of assets by employees, which is misappropriation of assets.
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