Question

what is Fraud Scheme/Financial Statement Fraud Due? brief explanation with example.

Answer 1

Solution. The term fraud comes when a business operates to earn profit in the market through illegal ways/means.The Foreign Corrupt Practices Act came under law administration in 1977 in US.

The four main financial statements prepared by a company/business- income statements,balance sheet,cash flow statement and shareholder's equity statements.

Enlisted below are fraud scheme/financial fraud can be in form:

Misappropriation of funds- It occurs when a company/business possesses and controls funds belonging to another individual/company/organization for own purpose. For instance if a company is accused of misappropriating funds more than $100,000 will be charged under first degree of felony and can be levied with a fine of $10,000 and up to 30 years of imprisonment.

Corruption and bribery-It comes in a situation when an power holding authority/entity uses its position for private gain.For instance if a company is found guilty of such practices can call for fines up to $100,000 and five years imprisonment and also can lead to forfeiture of assets,disgorgement of profits,suspension.

Identity theft-It encompasses the practice of using someone else's personal details without their consent for one's gains.It is a federal crime and if an entity if found guilty of calling,asking and using other's social security number and other personal details under the name of a financial institution(for instance) can call for a penalty of incarceration sentence,fines of more than $5,000.

Embezzlement-It is the process of gaining access to someone else's property or assets obtained lawfully and making it under one's own ownership or using for other gains.For instance,one such a famous case was ponzi scheme which biked investors under the cover of conservative portfolio management strategy.

Improper cash flow presentation- It happens when a company xyz(for instance) paints a positive picture of operating cash flows to manipulate its stakeholders to generate cash by showing proceeds from a loan transaction as cash flows from operations.