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Financial Statement Fraud Schemes

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Financial Statement Fraud Schemes
Financial Statement Fraud Schemes
While evaluating Apollo Shoes, there are some areas of concern that are potential fraud schemes. Fraud can lead to the entire collapse of a company if not corrected, and will also affect share value and investor confidence. This paper provides an overview of the process of investigation along with recommendations for the company.
As with any company, revenue recognition is an important part of operations for Apollo Shoes. Generally accepted accounting principles (GAAP) requires revenue generated to be realistic and recognizable. Revenue is recognized when a sale is completed, and the sale is completed when it has been paid for, and the product is handed to the customer or mailed to the desired location. Sales may be paid for up front, or on credit and recorded as an account receivable. When reviewing the books for Apollo Shoes, the numbers are inconsistent with the accounts receivable. Confirmations received from customers were not in line with the account balances. This raised a flag of concern for revenues being misstated. The difference doesn’t appear to make a considerable increase in cash flow, but the issue needs to be addressed and corrected before the difference becomes larger. This can also be an indication of revenue misstatements.
When there are discrepancies in the financial statements obtained from the company and the financial institution, further investigation must be performed.
Fixed Assets
There are some common forms of fraud in relation to fixed assets, concealment, misuse, and improper classification. All of these have an impact on the book value for the organization and the equity for the shareholders. The organization is responsible to record assets in the correct account for tracking and valuation.
The fixed assets can also be traced from the beginning of the year to the end for verification of existence and/or write off of assets. The capitalization policy of assets can also be evaluated for

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