Learn About Accounting Fraud And How To Avoid It
Accounting Fraud "Covers Up" Money Irregularities
* Revealing Key Cover Up Motives. Accounting fraud can mask attempted investment fraud by failing to honestly report the income, expenses or costs and losses of the enterprise to its shareholders. Forensic accounting fraud experts often refer to this sort crime case as "cooking the books" in order to deceive or defraud an unsuspecting party from the truth of the company or partnership's operations.
* Targets Include "Profits" And "Losses". Articles on accounting fraud show that it is used to both cover up losses as well as profits. In the event of unexpected losses, accounting fraud enables management to alter inter-financial relationships such as working capital availability, cost of operations, cost of sales, extra-ordinaries, and so on.
* Case Of Enron. The Enron accounting fraud, for example, reflected complex offshore derivative financing and trading contract arrangements that successfully masked the true financial condition of one of the world's largest energy companies.
The Enron accounting fraud not only abused the legitimate interests of its shareholders, but the accounting fraud and esoteric accounting and reporting strategies adopted by Arthur Andersen and Company as well as its Andersen Consulting firm on the instruction of enron led to the destruction of a long established world wide accounting firm.
* Hiding "Profit" Increases From Shareholders. Accounting fraud can be utilized by small or large firms alike in order to mask unexpected profit increases. What typically happens in these instances, such as with the Tyco accounting fraud, is that a small coterie of senior executives suddenly receives inflated bonuses or stock options, a fraud that directly takes value away from other shareholders' position.
* Abusing Business Expenses For "Personal" Gain. Accounting fraud at the small end of the company spectrum generally relies on improperly mixing personal with corporate expenses. What you'll find as the accounting fraud forensic experts make their way through the numbers is that travel and entertainment, furnishing, undisclosed cash advances, and more get converted out of the corporation's accounts and records, and become perks and benefits undisclosed by owner managers.
* Mixing "Personal" Monies Into Bogus "Loans" To Company. Accounting fraud is an attraction to small business owners who become tempted by the chance to insinuate their personal income tax obligations into the affairs of the company.
Accounting fraud in these cases can take the form of a person who not only has a regular daily job, but also carries a titular role in his or her own firm, such as a "consulting firm". The accounting fraud relies upon the fact that the alleged consulting firm is under-capitalized, therefore will require either "capital" or "loans" in order to survive.
And so in one deft move, the person's salary become the lifeline to the company, with phony "loans" moving to the company, which increase debt and losses, meanwhile the same monies are taken out in an accounting fraud maneuver for personal use as for travel, home and apartment rents, car leases, dining and entertainment.
Accounting fraud executed in this manner can virtually create a tax free environment for the company and individuals supplying the phony "loans". It's then up to forensic accounting fraud experts to expose the fraud and alert the tax and government authorities to aggressively prosecute.
* Professional Standards - Full Disclosure. Forensic accounting fraud professionals understand that their license to conduct financial services within the state depend upon full disclosure and truthfulness in accounting and reporting practices, in order to remove deceit or fraud upon an unsuspecting public or private shareholder group.
* Business Media Track Performance. Accounting fraud articles are continually published both in professional interest magazines as well as in major financial dailies such as the Wall Street Journal or Investors Business Daily, whose reporters and editors regularly discuss the implications of accounting fraud or securities fraud and their impact on the rights and interests of public stockholders.
Copyright 2004-2010 S&T US LLC
©2004-2010 Wise4Living | Contact | Advertising Info | Legal | Privacy | Directory
