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ACFE CFE-Financial-Transactions-and-Fraud-Schemes Exam - Topic 2 Question 118 Discussion

Depreciation is especially applicable when companies try to overvalue their assets and net worth; the lower their depreciation expense, the higher the company's profits.
A) True
B) False

ACFE CFE-Financial-Transactions-and-Fraud-Schemes Exam - Topic 2 Question 118 Discussion

Actual exam question for ACFE's CFE-Financial-Transactions-and-Fraud-Schemes exam
Question #: 118
Topic #: 2
[All CFE-Financial-Transactions-and-Fraud-Schemes Questions]

Depreciation is especially applicable when companies try to overvalue their assets and net worth; the lower their depreciation expense, the higher the company's profits.

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Suggested Answer: A

by Evelynn at Nov 01, 2025, 07:56 PM

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Alysa
7 months ago
True, companies might inflate profits this way.
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Ellsworth
7 months ago
True, but it can mislead investors.
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Rebecka
7 months ago
I disagree, it's B) False. Depreciation reflects asset value.
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Denny
7 months ago
Not sure if that’s the whole picture, though.
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Honey
7 months ago
Lower depreciation means higher profits, makes sense.
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Ardella
8 months ago
Surprised to see this, thought depreciation was a good thing!
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Gearldine
8 months ago
I disagree, it’s just accounting practice.
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Mattie
8 months ago
Ah, the age-old debate of depreciation vs. overvaluation. Fascinating!
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Annelle
8 months ago
False, depreciation is a legitimate accounting practice.
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Tashia
8 months ago
I vaguely recall that companies can manipulate depreciation methods, which could affect profits. But I’m torn on whether this statement is true or false.
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Buddy
8 months ago
True, depreciation can inflate profits.
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Tiera
9 months ago
I think it's A) True. Lower depreciation means higher profits.
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Cammy
9 months ago
True, that's how they cook the books!
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Richelle
9 months ago
Depreciation is the bane of my existence.
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Stevie
9 months ago
I feel like this statement is misleading. Depreciation is an expense that reduces taxable income, so I think it might actually be false.
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Geoffrey
9 months ago
I think we covered a similar question in class about how depreciation impacts financial statements. If depreciation is lower, profits might look better, but I’m not confident about the wording here.
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Edmond
10 months ago
I remember discussing how depreciation affects asset valuation, but I'm not sure if it directly relates to profit levels like this question suggests.
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Precious
10 months ago
Ugh, I hate questions about accounting principles. This feels like it's testing some subtle nuance that I'm just not grasping. I'm going to have to guess on this one - I'll go with B) False, but I'm not super confident.
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Elfriede
10 months ago
Okay, I've got a strategy for this. Depreciation is meant to match the expense of an asset's use with the revenue it generates. If a company tries to understate depreciation, that would inflate their profits, which seems like the definition of overvaluing their assets. I'm going with B) False.
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Na
10 months ago
Hmm, I'm a little unsure about this one. I know depreciation is important for accurately representing a company's financial position, but I'm not totally clear on how it relates to overvaluing assets. I'll have to think this through carefully.
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Lang
10 months ago
I think this is a pretty straightforward question. Depreciation is used to account for the loss in value of assets over time, so a lower depreciation expense would make profits appear higher. I'll go with B) False.
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Dana
5 months ago
Exactly! B) False makes more sense.
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Aleisha
5 months ago
But isn't it misleading?
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Merlyn
6 months ago
I think it's A) True. Lower depreciation does inflate profits.
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Rebecka
6 months ago
True, but I see your point.
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Shawna
7 months ago
I agree, it's definitely B) False.
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