Question

Which of the following statements regarding fraud on behalf of an organization is true? a. ​This type of fraud includes inflating expenses in order to save of corporate income taxes. b. ​Middle management is usually the perpetrator. c. ​Financial statement fraud is common among publically-traded companies who must meet the public's expectations. d. ​This type of fraud benefits top executives as it generally increases stock price.

Answer 1

Answer:d. ​This type of fraud benefits top executives as it generally increases stock price.

Explanation:Fraud can be defined as a deliberate misrepresentation to gain an advantage over another party. Fraud comes in many different forms, including fraud in financial statements, the misappropriation of assets (theft) and subsequent cover-up, and disclosure fraud.

Fraud involves the false representation of facts, whether by intentionally withholding important information or providing false statements to another party for the specific purpose of gaining something that may not have been provided without the deception.

company committing fraud is taking advantage of information asymmetry; specifically, that the resource cost of reviewing and verifying that information can be significant enough to create a disincentive to fully invest in fraud prevention.

Answer 2

Answer:

The correct answer is letter "D": This type of fraud benefits top executives as it generally increases stock price.

Explanation:

Securities fraud happen usually when the company hires promoters to spread false information on the firm in an attempt to attract more buyers which will raise the stock price. These benefit executives of those institutions who were holding stocks at lower prices and take advantage of the rising prices to exit their positions with considerable profits.  

After a large number of stocks are sold by the executives the stock price returns to its average level or lower. This practice is known as "pump and dump" and is regulated by the Securities and Exchange Commission (SEC).