Asset misappropriation fraud refers to the fraud where third-parties or workers of the entity misuse their position for pilfering or exploitation of the assets of the organization. It includes embezzlement of cash, assets stolen, and various other related losses. Fraudulent financial reporting refers to manipulations of income earned by the management in order to have personal gains or to prevent an organization from bankruptcy or any other negative financial results. To explain: The reporter’s observation in small organizations where asset misappropriation is more likely to be found, while in large organization, fraudulent financial reporting is more likely to be found.

Question

Assume that you are interviewed by a student newspaper regarding the nature of accounting fraud. The reporter says, "As I understand it, asset misappropriations are more likely to be found in small organizations, but not in larger organizations. On the other hand, fraudulent financial reporting is more likely to be found in larger organizations." How would you respond to the reporter's observation?

Answer 1

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Chapter 2, Problem 27RSCQ

To determine

Introduction: Asset misappropriation fraud refers to the fraud where third-parties or workers of the entity misuse their position for pilfering or exploitation of the assets of the organization. It includes embezzlement of cash, assets stolen, and various other related losses.

Fraudulent financial reporting refers to manipulations of income earned by the management in order to have personal gains or to prevent an organization from bankruptcy or any other negative financial results.

To explain: The reporter’s observation in small organizations where asset misappropriation is more likely to be found, while in large organization, fraudulent financial reporting is more likely to be found.

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