Which of the following is an example of financial statement fraud:
A) The sales manager records as a sale shipments of goods on January 1, 20X1, the day after year-end
B) The financial controller capitalizes a large amount of expenses that should have been included on the income statement
C) The CEO insists that current year bonuses be deferred to the next fiscal year for payment
D) Both "a" and "b"

Question

Which of the following is an example of financial statement fraud: 
A) The sales manager records as a sale shipments of goods on January 1, 20X1, the day after year-end
B) The financial controller capitalizes a large amount of expenses that should have been included on the income statement
C) The CEO insists that current year bonuses be deferred to the next fiscal year for payment
D) Both "a" and "b"

Quizplus · Accepted Answer

Recording sales after year-end and capitalizing expenses are both examples of financial statement fraud. Both actions can manipulate the financial statements to show better results than what actually occurred. Therefore, both (A) and (B) are fraudulent actions. (C) is not an example of financial statement fraud as it does not impact the accuracy of the financial statements, but rather the timing of when the bonuses are paid.

Which of the Following Is an Example of Financial Statement