Difference between reported income and free cash flows

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Problem 1: A company had not inflated its income in prior periods. However, it fraudulently inflates its reported income in the current period by booking revenues early and delaying expenses. Which one of the following best describes the impact of this fraud on the difference between reported income and free cash flows in the current period?

a. The gap will increase.
b. The gap will decrease.
c. The gap will remain unchanged.
d. There is no clear relationship between the gap and booking revenues earlier and delaying expenses.

Reference no: EM132976708

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