Question

Inadequate disclosure fraud usually involves:

a) statements in the footnotes that are wrong but do not impact the financial statement
b) disclosures that should have been made in the footnotes but were not
c) both a and b
d) neither a nor b

Answer 1

Inadequate disclosure fraud involves the omission of necessary disclosures in the financial statement footnotes. The correct answer is b) disclosures that should have been made in the footnotes but were not.

Step-by-step explanation:

Inadequate disclosure fraud generally involves disclosures that should have been made in the footnotes but were not. This type of fraud can significantly impact the financial statements as it misleads users by omitting critical information necessary for informed decision-making.

Examples of inadequate disclosure can include hiding liabilities, not disclosing related party transactions, or not providing important information about financial risks.

The correct answer to the question 'Inadequate disclosure fraud usually involves:' is b) disclosures that should have been made in the footnotes but were not. In some instances, this may also include statements in the footnotes that are incorrect and also have a significant impact on the financial statements.