Which of the following situations most likely represents the highest risk of a misstatement arising from misappropriations of assets? A large number of bearer bonds on hand. A large number of inventory items with low sales prices. A large number of transactions processed in a short period of time. A large number of fixed assets with easily identifiable serial numbers.

Question

Apple Jack

Business

19 April, 16:15

Which of the following situations most likely represents the highest risk of a misstatement arising from misappropriations of assets? A large number of bearer bonds on hand. A large number of inventory items with low sales prices. A large number of transactions processed in a short period of time. A large number of fixed assets with easily identifiable serial numbers.

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Kaiden · Answer 1

A large number of bearer bonds on hand

Explanation:

Misappropriation of assets refers to assets theft. Using company property for personal gain or misappropriating the funds for purchase of assets for personal expenses, recording fictitious purchase of assets, etc are examples of misappropriation of assets.

Holding large number of bearer bonds with no authenticity of purchase or record of purchases is a common case of misappropriation of assets. Such bonds registration and title needs to be checked.

Bearer bonds refer to the bonds whose ownership rests with the bearer/holder of the instrument. Such bonds are unregistered.

In case of bearer bonds, the actual owner cannot be identified and thus these have been used for concealing gains on such investments and to conceal income.