Question

In: Accounting

Because all fraud involves some form of financial misstatement, how is fraudulent statement fraud different?

Because all fraud involves some form of financial misstatement, how is fraudulent statement fraud different? 

Solutions

Expert Solution

Fraudulent statements are associated with management fraud. While all fraud involves some form of financial misstatement, to meet the definition under this class of fraud scheme, the statement itself must bring direct or indirect financial benefit to the perpetrator. In other words, the statement is not simply a vehicle for obscuring or covering a fraudulent act. For example, misstating the cash account balance to cover the theft of cash does not fall under this class of fraud scheme. On the other hand, understating liabilities to present a more favorable financial picture of the organization to drive up stock prices does qualify.


Management fraud involves financial statements benefiting the perpetrator directly or indirectly, not just obscuring fraudulent acts.

Related Solutions

2. True of false?  A financial statement fraud is the deliberate misstatement or omission of amounts or...
2. True of false?  A financial statement fraud is the deliberate misstatement or omission of amounts or disclosures in the financial statements to deceive financial statement users. MULTIPLE CHOICE True or False 3. The Worldcom fraud was discovered because of tips to the internal auditors. MULTIPLE CHOICE True or False 4. True of false? Bribery, economic extortion, and conflict of interest each involve the exertion of the influence of an official or employee that has a detrimental effect on his constituency...
Fraud is intentional deceit or trickery that results in a misstatement of the financial statements. Management...
Fraud is intentional deceit or trickery that results in a misstatement of the financial statements. Management is responsible for taking steps to reduce the risk of fraud. After quite a few instances of fraud in many large, publicly owned companies in recent years, a number of accounting reforms have been instituted to safeguard against fraud. One major change was the Sarbanes-Oxley Act (SOX) of 2002. SOX included a set of reforms that toughened penalties for corporate fraud, restricted the types...
Auditing - Fraud through Misappropriation of Assets or Fraudulent financial reporting State one type of fraud...
Auditing - Fraud through Misappropriation of Assets or Fraudulent financial reporting State one type of fraud that can occur for the accuracy objective of provision for warranty (liability account) State one type of fraud that can occur for the sales occurrence objective of sales revenue (revenue account)
The most common scheme type used in financial statement fraud involves manipulation of revenue figures. Schemes...
The most common scheme type used in financial statement fraud involves manipulation of revenue figures. Schemes to manipulate revenue figures typically involve posting sales before they are made or prior to payment. Examples include recording product shipments to company-owned facilities as sales, re-invoicing past due accounts to improve the age of receivables, Pre-billing for future sales and duplicate billings. How easy or hard is it to manipulate the revenue figures? Why? Anyone?
1 A.Mention some misstatement of fraud risk in revenue cycle! B.Mention some analytical procedure ratio related...
1 A.Mention some misstatement of fraud risk in revenue cycle! B.Mention some analytical procedure ratio related to inventory and payment cycle! C.Why cash is considered as high inherent risk? D.What is the different between disposal and impairment of non current (fixed) asset? E.Mention some test of control regarding inventory and payment cycle! F.Provide example of each management fraud and employee fraud regarding cash account!
. Discuss the auditor’s responsibility for detecting fraud, including fraudulent financial reporting and misappropriation of assets....
. Discuss the auditor’s responsibility for detecting fraud, including fraudulent financial reporting and misappropriation of assets. Is there any sign that should alert the auditor to potential fraud?
"Fraudulent Financial Reporting" As economic crimes increase globally, accounting fraud is consistently in the top three...
"Fraudulent Financial Reporting" As economic crimes increase globally, accounting fraud is consistently in the top three areas according to a global survey reflected in the chapter. Use the Internet or Strayer Library to research a company sanctioned for financial accounting fraud in the past five (5) years. Give your opinion on the situational pressures that caused perpetrators to commit the fraudulent reporting. Assess the opportunities for fraudulent financial reporting and discuss ways the company you researched could eliminate fraudulent reporting
What is Fraud Detection and how can Decision Tree be used to discover and prevent Fraudulent...
What is Fraud Detection and how can Decision Tree be used to discover and prevent Fraudulent Activity?
Select and discuss an area of financial statement fraud.
Select and discuss an area of financial statement fraud.
What is Benford's Law and how can it be applied to detect financial statement fraud?
What is Benford's Law and how can it be applied to detect financial statement fraud?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT