Scribd Logo
Upload

Welcome to Scribd!

  • Lecture Slides - Fraud Schemes & Red Flags of Fraud

    Uploaded by

    Jonnel Sadian Acoba
    206 views11 pages
    The document discusses five types of financial statement frauds: (1) revenue and accounts receivable frauds, (2) inventory and cost of goods sold frauds, (3) understating liability and expense frauds, (4) overstating asset frauds, and (5) overall misrepresentation. It also lists some red flags of fraud such as changes in employee lifestyle, decline in employee morale, one employee controlling everything, and missing or altered documents.

    Original Description:

    Original Title

    Lecture Slides - Fraud Schemes & Red Flags of Fraud (1).ppt

    Copyright

    © © All Rights Reserved

    Available Formats

    PPT, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    The document discusses five types of financial statement frauds: (1) revenue and accounts receivable frauds, (2) inventory and cost of goods sold frauds, (3) understating liability and expense frauds, (4) overstating asset frauds, and (5) overall misrepresentation. It also lists some red flags of fraud such as changes in employee lifestyle, decline in employee morale, one employee controlling everything, and missing or altered documents.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as ppt, pdf, or txt
    206 views11 pages

    Lecture Slides - Fraud Schemes & Red Flags of Fraud

    Uploaded by

    Jonnel Sadian Acoba
    The document discusses five types of financial statement frauds: (1) revenue and accounts receivable frauds, (2) inventory and cost of goods sold frauds, (3) understating liability and expense frauds, (4) overstating asset frauds, and (5) overall misrepresentation. It also lists some red flags of fraud such as changes in employee lifestyle, decline in employee morale, one employee controlling everything, and missing or altered documents.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as ppt, pdf, or txt
    of 11

    FinancialStatement Frauds

    Red Flags of Fraud


    Financial Statement Frauds
    1. Revenue/Accounts Receivable Frauds
    (Global Crossing, Quest, ZZZZ Best)
    2. Inventory/Cost of Goods Sold Frauds
    (PharMor)
    3. Understating Liability/Expense Frauds
    (Enron)
    4. Overstating Asset Frauds (WorldCom)
    5. Overall Misrepresentation (Bre-X
    Minerals)
    1. Revenue Related Financial
    Statement Frauds
     By far, the most common accounts
    manipulated when perpetrating financial
    statement fraud are revenues and/or
    accounts receivable.

     Accounts Receivable xxx


    Revenues xxx
    (Income Assets )
    Revenue-Related Transactions and Frauds

    See Excel handout #1


    2. Overstating Inventory
     The second most common way to commit
    financial statement fraud is to overstate
    inventory.
    Beginning Inventory OK
    Purchases OK
    Goods Available for sale OK
    Ending Inventory High
    Cost of Goods Sold Low
    Income High
    Inventory/Cost of Goods Sold Frauds

    See Excel handout #2


    3. Understating Liability Frauds

     Not recording accounts payable


     Not recording accrued liabilities
     Recording unearned revenues as earned
     Not recording warranty or service liabilities
     Not recording loans or keep liabilities off
    the books
     Not recording contingent liabilities
    4. Asset Overstatement Frauds

     Overstatement of Current Assets (e.g.


    Marketable Securities)
     Overstating Pension Assets
     Capitalizing as assets amounts that should be
    expensed
     Failing to record depreciation/amortization
    expense
     Overstating assets through mergers and
    acquisitions
     Overstating inventory and receivables (covered
    earlier)
    5. Disclosure Frauds
    Three Categories of Disclosure Frauds:
    1. Overall misrepresentations about the nature of the
    company or its products, usually made through news
    reports, interviews, annual reports, and elsewhere

    2. Misrepresentations in the management discussions and


    other non-financial statement sections of annual reports,
    and other reports

    3. Misrepresentations in the footnotes to the financial


    statements
    RED FLAGS OF FRAUD
     Changes in employee lifestyle,
    habits and behaviour
     Decline in employee morale
    and/or attendance
     Operating on a crisis basis
     Unexplained variances
     One employees “does it all” and
    wants to control everything
    RED FLAGS OF FRAUD
    (continued)
     Missing, altered, or perfect
    documents
     Invoice items do not appear
    consistent
     Excessive rush or emergency
    transactions
     Vendors with generic names and/or
    Post Office Boxes as addresses
     Payments made from non-original
    documentation

    You might also like