Lorenzo used journal entries to move backdated sales that occurred just after the start of the fiscal year to the previous fiscal year. What type of fraud scheme did Lorenzo use to overstate financial performance for the previous fiscal year?
A) Sham sales
B) Channel stuffing
C) Sales cutoff
D) Unauthorized shipments

Question

Quizplus · Accepted Answer

Sales cutoff schemes involve manipulating the timing of revenue recognition, such as recording sales in an earlier period than they actually occurred, to inflate financial results. Lorenzo's action of moving sales back to the previous fiscal year is a classic example of manipulating the sales cutoff to overstate financial performance.

Lorenzo Used Journal Entries to Move Backdated Sales That Occurred