Case Study: The Importance of Timing
University of Phoenix
December 19, 2011
To: The Management
From: Forensic Auditor
Subject: Case Study on the Importance of Timing and Financial Statement Fraud Scheme As our company is in process of conducting investigation to detect any financial statement fraud or abuse, I have come across the case where expenses were recorded in the financial statement under the period it was disbursed to vendor and actual services occurred in next or other financial year period. It’s against the regulation of SEC and GAAP guidelines. In this particular case the repair were completed in current year and vendor was prepaid for services in full last year financial period, which a violation by recording expenses in the wrong period. No one took the funds and commit fraud but it shows inaccurate expenses and revenue in financial statement for both current and past years. It was done to maintain the repair budget for last year as there was room to spend more last year , so the plant supervisor and purchase manager decided to pay in advance last year and actual services were occurred this year.
As per scope of examination a company can lose a substantial amount of revenue through occupational fraud and abuse. There is several deterrence methods can be implemented by a company to avoid frauds and abuse by employees. This misleading financial statement fraud may impact our company’s investment potential, credit worthiness, business operation, and employee morale (Wells, 2005). The SEC Acts of 1933 and 1934 were passed by Congress of United States to provide sources of potential liability for accountants to ensure protection for investors and for facilitation of orderly capital markets (Lowers, Ramsey, Sinason & Strawser, 2007). These acts enforce accountability on accountants to practice integrity when working for clients and...