Financial Statement Fraud Schemes

Topics: Generally Accepted Accounting Principles, Balance sheet, Accounts receivable Pages: 3 (773 words) Published: October 1, 2011
Apollo Shoes has hired me to take part of an investigation in regards to fraudulent activity within the company. Fraud schemes can be apparent in a lot of companies and as an investigator, I must use the evidence found to show the fraud schemes in the company. I have come up with an overview of how the investigation will be handled and any recommendations that I find necessary. Revenue Recognition

Apollo Shoes have many inconsistencies with the accounts receivable account. Generally Accepted Accounting Principles (GAAP) states that a company needs to generate revenue that is realistic, since only these kinds of revenue will be acknowledged (Epstein, Nach, & Bragg, 2009). Revenues should be shown when the products are sold and the sale is recorded. According to the Apollo Shoes information obtained, a confirmation letter received from the customer saying that the records are indeed consistent with their purchases. However, they were told afterwards they have already paid their outstanding balance way back in November (Louwers, Ramsay, Sinason, & Strawser 2007). This kind of inconsistency suggests that Apollo Shoes has been misstating their revenues, even if there was not a significant increase with their cash flow. It is relatively easy to spot this fraud by comparing the accounts receivable and the customer accounts. There are other ways to detect fraudulent activity within a company. Investigators will request a copy of the recent financial statement and compare it with the previous financial statements. If there are many changes, an investigation will be sought. Investigators also look into the revenue accounts of the organization to verify whether there are any malicious financial inputs included. Fixed Assets

Some common forms of fraud when it comes to fixed assets are theft, concealment, improper encoding, and misuse. Improper reporting of the fixed assets can have a large impact on the financial health of the company. The company has to take...
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