Which of the following best describes skimming in the context of fraud?

Skimming, in the context of fraud, refers to the process where cash or revenue is taken before it is recorded in the company's financial records. This often occurs in retail environments or businesses where transactions are made in cash. By conducting off-book sales of goods (as captured in the first choice), the perpetrator avoids detection because these transactions are not entered into the financial system and thereby do not appear on financial statements.

The other options, while related to fraudulent activities, do not accurately define skimming. Overreporting inventory involves inflating inventory levels on financial statements, which is a different type of financial misstatement. Falsifying expense reports relates to inflating or fabricating expenses for reimbursement, an act associated with misappropriation of funds but distinct from skimming. Creating fictitious vendors involves setting up nonexistent entities to process fraudulent payments, which is another form of fraud but not categorized as skimming.

Understanding skimming as off-book sales highlights the fundamental nature of this fraud type, emphasizing how it circumvents traditional recording processes to allow the fraudster to misappropriate funds without immediate detection.