Which fraudulent activity occurs if an employee misrepresents personal expenses as business-related?

The activity described in the question is best classified as expense reimbursement fraud. This type of fraud occurs when an employee submits false claims for reimbursement, either by inflating legitimate expenses or by claiming personal expenses as business-related. The essence of this fraud lies in the submission of inaccurate or misleading information to secure funds that the employee is not entitled to receive.

Expense reimbursement fraud is particularly common because it relies on the trust placed in employees to provide accurate information about their spending. When an employee intentionally misrepresents expenses, it directly impacts the organization's financial integrity, often resulting in financial losses. This form of fraud is distinct from other fraudulent activities like financial manipulation—where the structure of financial statements is altered—or asset misappropriation, which typically involves stealing physical or intellectual assets. Tax fraud, on the other hand, is related to falsifying information to reduce tax liabilities, rather than misrepresenting expenses for reimbursement purposes.

Understanding expense reimbursement fraud is essential for organizations as it aids in strengthening internal controls and developing prevention strategies against such misconduct. This recognition also emphasizes the importance of accurate reporting and monitoring of expenses as a component of corporate governance and financial accountability.