Chapter 2, Problem 27RSCQ

To determine

Introduction: Asset misappropriation fraud refers to the fraud where third-parties or workers of the entity misuse their position for pilfering or exploitation of the assets of the organization. It includes embezzlement of cash, assets stolen, and various other related losses.

Fraudulent financial reporting refers to manipulations of income earned by the management in order to have personal gains or to prevent an organization from bankruptcy or any other negative financial results.

To explain: The reporter’s observation in small organizations where asset misappropriation is more likely to be found, while in large organization, fraudulent financial reporting is more likely to be found.