Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

Financial Accounting

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

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Multiple Choice

Why should managers be concerned about product overcosting or undercosting in relation to fraud risk?

Because accurate costing is only important for external auditors, not for managers.

Because overcosting always leads to higher profits for the company.

Because inaccurate costing can distort financial statements and potentially conceal fraudulent activities.

Because undercosting ensures that all products are sold at a loss, which is beneficial for tax purposes.

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Verified step by step guidance

Understand the concept of product costing: Product costing involves assigning costs to products based on direct materials, direct labor, and overhead. Accurate costing is essential for decision-making and financial reporting.

Recognize the implications of overcosting: Overcosting occurs when a product is assigned more costs than it actually incurs. This can lead to inflated product prices, reduced competitiveness, and distorted financial statements.

Recognize the implications of undercosting: Undercosting happens when a product is assigned fewer costs than it actually incurs. This can result in selling products at a loss, misallocation of resources, and inaccurate profitability analysis.

Understand the connection to fraud risk: Inaccurate costing can distort financial statements, which may conceal fraudulent activities such as misrepresentation of profits or manipulation of expenses. Managers must ensure accurate costing to maintain transparency and compliance.

Conclude the importance for managers: Managers should be concerned about product overcosting or undercosting because it impacts decision-making, financial reporting, and fraud prevention. Accurate costing ensures the integrity of financial statements and supports ethical business practices.