Question

Which of the following items would constitute fraud?

A. mistakenly overlooking the matching principal and allowing revenues that should be applied over three months to all be recognized in a single month
B. basing financial statement information on data that was entered improperly by data entry personnel
C. misappropriation of petty cash
D. misinterpreting FASB statements in a manner that greatly increases stated revenue

Answer 1

C.misappropriation of petty cash.

Fraud involves an angle of deliberation, misappropriation of petty cash does involve deliberate attempt to do something wrong.

MIstakenly overlooking the matching principal and allowing revenues that should be applied over three months does not involve deliberate intention to do something wrong, it is an error in application of principal.

Basing financial statement information on data entered improperly does not amount to fraud.

Misinterpreteing FASB statements in a manner that greatly increases stated revenue does not amount fraud since it does not involve any deliberate concealing of facts.