What type of fraud occurs when false financial statements are created?

Financial statement fraud occurs when individuals or organizations intentionally distort the financial records to present a misleading picture of their financial performance or position. This type of fraud often involves the creation of false financial statements, which may include the manipulation of revenue figures, expenses, or asset values to deceive stakeholders such as investors, lenders, or regulatory authorities.

This fraudulent activity is particularly serious as it undermines the integrity of financial reporting and can lead to significant financial losses for those relying on this information. The ultimate goal of financial statement fraud is often to inflate stock prices, secure financing, or hide a company’s financial troubles.

Other options, while they represent different types of fraud, do not specifically involve the creation of false financial statements. Asset misappropriation refers to theft or misuse of an organization’s assets, vendor fraud typically relates to collusion with vendors to manipulate prices or services, and money laundering involves disguising the origins of illegally obtained money. Financial statement fraud is distinct in that it specifically targets the accuracy and truthfulness of financial reporting.