Financial Statements Fraud

Topics: Generally Accepted Accounting Principles, U.S. Securities and Exchange Commission, Balance sheet Pages: 10 (1978 words) Published: January 24, 2015
Financial
 Statements
 Fraud
 

 

Table
 of
 Contents
 

 
Introduction
 ........................................................................................................  1
 
Definition
 .............................................................................................................  1
 
Purpose
 of
 Financial
 Statements
 Fraud
 .....................................................
 1
 
Financial
 Statement
 Fraud
 Schemes
 ...........................................................  3
 
Inappropriate
 Revenue
 Recognition
 ..........................................................................................  3
 
Overstatement
 of
 Assets
 .................................................................................................................  3
 
Understatement
 of
 Expenses
 and
 Liabilities
 ...........................................................................  3
 

Reasons
 of
 Preparing
 Fraudulent
 Financial
 Statements
 .....................
 6
 
Concluding
 Remarks
 ........................................................................................  8
 
References
 ...........................................................................................................  9
 

 

 

 

By
 Tullu
 Merechi,
 American
 Public
 University,
 November
 2014
 

 

0
 

Financial
 Statements
 Fraud
 

Introduction
 
Fraud
  is
  a
  dishonest
  intentional
  exercise
  targeted
  to
  gain
  unfair
  and
  unlawful
 
benefits.
 
 Financial
 Statements
 Fraud
 in
 particular
 is
 the
 intentional
 misstatement
 or
 
omission
  of
  essential
  financial
  information
  in
  order
  to
  influence
  users’
  business
 
decisions.
  Users
  of
  financial
  information,
  among
  others,
  include,
  potential
  investors,
 
creditors,
  shareholders,
  employees,
  the
  general
  public,
  and
  government.
  Realistic
 
and
 accurate
 financial
 information
 leads
 to
 a
 quality
 business
 decision,
 and
 the
 vice
 
versa.
 
 

 
This
  short
  term
  paper
  mainly
  focuses
  on
  financial
  statements
  fraud,
  its
  impact
  on
 
business
  decisions,
  schemes
  of
  financial
  statement
  fraud,
  the
  reasons
  behind
 
committing
 the
 fraud,
 and
 gives
 concluding
 remarks
 on
 the
 consequences
 and
 how
 
business
 leaders
 and
 auditors
 can
 tackle
 such
 short
 sighted
 deception
 (of
 financial
 
statements
 fraud).

Definition
 
 
Financial statement fraud is an intentional parody, misstatement or exclusion of essential financial statement information in order to mislead users by creating a false impression of an organization's financial strength (Bedfird).

Purpose
 of
 Financial
 Statements
 Fraud
 
Users of financial information, according to Accounting-Simplified.com, includes stockholders, potential investors, financing institutions such as banks, suppliers, customers, employees, competitors, the general public, and government. Public and/or private businesses commit financial statement fraud, to draw attention of financial statement users so as to secure investors’ interest or obtain bank approvals for

By
 Tullu
 Merechi,
 American
 Public
 University,
 November
 2014
 

 

1
 

Financial
 Statements
 Fraud
 
financing, or justification for bonuses or increased...

References: 2. Auditing Standards Board, Statement of Auditing Standards No. 99, December 15,
2002
4. Cressey, Donald, Other People 's Money (Montclair: Patterson Smith, 1973) p. 30, as
quoted in the Association of Certified Fraud Examiners, the Fraud Triangle, available
Statement Fraud Red Flags (2008), available on:
http://www.mondaq.com/unitedstates/x/56058/White+Collar+Crime+Fraud/Recogniz
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