Which of the following is an example of financial statement fraud?

Financial statement fraud encompasses a range of deceptive practices aimed at misleading stakeholders about a company's financial health. Among the choices provided, each example reflects a different aspect of this type of fraud.

Overstating revenue to improve financial performance is a direct attempt to inflate a company's apparent profitability. This practice can mislead investors and creditors about the actual viability of the business and is categorized as financial statement fraud because it distorts the information presented in the financial statements.

Underreporting expenses to reduce taxes is also a fraudulent act that impacts financial reporting, as it manipulates the numbers presented to tax authorities and misrepresents the company's profitability. This can lead to financial statements that inaccurately showcase higher earnings due to lower stated expenses, thus misleading stakeholders.

Falsifying customer contracts represents another fraudulent act that can affect the authenticity of the financial statements. If contracts are altered or fabricated to reflect non-existent sales or income, this would mislead stakeholders about the company’s operations and earnings.

Since all the activities listed—overstating revenue, underreporting expenses, and falsifying contracts—contribute to an inaccurate portrayal of a company’s financial standing, the most comprehensive answer recognizes that all these actions exemplify financial statement fraud.