CFE – Financial Transactions and Fraud Schemes — Question 71

Fraud in financial statements generally takes the form of ____________ assets or revenue and ________ liabilities and expenses.

Answer options

• A. Overstated; understated
• B. Understated; overstated
• C. Overstated; overstated
• D. Understated; understated

Correct answer: B

Explanation

The correct answer is B because fraudulent activities often involve hiding the true financial position by understating assets or revenue while overstating liabilities and expenses. The other options do not accurately represent the common methods of financial statement fraud.