Which of the following best defines fraud in a business context?

• A. A legal method of reducing tax liability through proper planning.
• B. A mistake made in recording business transactions due to lack of knowledge or oversight.
• C. A routine business practice that increases company profits.
• D. An intentional act by one or more individuals to deceive others, resulting in a misstatement of financial statements or misappropriation of assets.

Answer: (D)

Verified step by step guidance

1. Understand the definition of fraud in a business context: Fraud involves intentional deception by individuals to misstate financial statements or misappropriate assets.
2. Eliminate options that do not align with the definition of fraud. For example, a legal method of reducing tax liability through proper planning is not fraud, as it is lawful and intentional but not deceptive.
3. Recognize that a mistake made in recording business transactions due to lack of knowledge or oversight is an error, not fraud, as it lacks intent to deceive.
4. Identify that a routine business practice that increases company profits is not fraud, as it does not involve deception or misstatement of financial information.
5. Conclude that the correct definition of fraud is: 'An intentional act by one or more individuals to deceive others, resulting in a misstatement of financial statements or misappropriation of assets.'