Which of the following scenarios is essentially an example of fraud?

• A. A company makes an honest mistake in recording inventory quantities.
• B. A manager forgets to approve a purchase order on time.
• C. A customer returns a defective product for a refund as per company policy.
• D. An employee intentionally falsifies expense reports to receive reimbursement for personal expenses.

Answer: (D)

Verified step by step guidance

1. Understand the definition of fraud in financial accounting: Fraud involves intentional deception or misrepresentation made by an individual or entity to gain an unfair advantage, typically for financial or personal benefit.
2. Analyze each scenario provided in the problem to determine whether it involves intentional deception or misrepresentation.
3. Scenario 1: A company makes an honest mistake in recording inventory quantities. This is not fraud because it is an unintentional error, not an act of deception.
4. Scenario 2: A manager forgets to approve a purchase order on time. This is not fraud because it is a lapse in procedure, not an intentional act of misrepresentation.
5. Scenario 4: An employee intentionally falsifies expense reports to receive reimbursement for personal expenses. This is fraud because it involves deliberate falsification of information for personal financial gain.