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Fraud Investigation

In: Business and Management

Submitted By haruka11111
Words 878
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Financial Statement Fraud |

By “Fraud Master” Team,

Introduction of Financial Statement Fraud

Financial statement fraud is by definition, the deliberate misstatements or omissions of amounts or disclosures of financial statements to deceive financial statement users, particularly investors and creditors. In other words, these fraudulent activities take place when a business entity engages in certain practices designed to hide or maneuver its accounts in order to remain attractive to investors.

Theoretically, there are three factors that appear to be present in every case of financial statement fraud. These factors are an apparent situational pressure, a perceived opportunity to commit and conceal the dishonest act, and some way to rationalize the act as justifiable. In simple terms, there is something that prompts otherwise honest people to consider dishonest acts (pressure), along with the perception that they can get away with it (opportunity), and an ability to justify why their actions were not dishonest (rationalization). This theory is better known as the fraud triangle which infers that if all three of these factors are present, there is a high likelihood that a fraud will be committed.

Major Categories of Financial Schemes

There are many different forms in which financial statement fraud can be perpetrated. The most common ones include: * Falsification, alteration, or manipulation of material financial records, supporting documents, or business transactions; * Material intentional omissions or misrepresentations of events, transactions, accounts, or other significant information from which financial statements are prepared; * Deliberate misapplication of accounting principles, policies, and procedures used to measure, recognize, report, and disclose economic events and business transactions; * Intentional omissions of…...

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