[Accounting]
Publicly traded firms are the main object where financial statement fraud takes place. ACFE Fraud tree includes 51 various sorts of fraud schemes, 20 of which cover 80% of the fraud accomplished. Fraudulent financial statements are executed by an executive manager. The level of frequency is 7, 9%.
There are several signs of fraud schemes: flows of cash and A/R that have no connection to do with earnings, allowances that do not correlate with A/R, reserves that do not correlate with Balance sheet items, purchasing without an apparent corporate aim, earnings that regularly and precisely cover expectations. The average amount of fraud is approximately $250,000; meanwhile the frequency is 30%.
The frequency of asset misappropriation, which is mainly carried out by employees equals 92,7%. The ACFE fraud tree includes larceny of cash and other assets, skimming, lapping of A/R, A/R written-off schemes, inappropriate use of assets for personal benefits, fraudulent disbursements and unregistered/unstated sales.
There are numerous of flags for fraud billing: checks are written to “cash”, and employee’s home address and initials match a vendor’s name, vendor data are formatted incoherently or at all missing, a vendor’s address has a P.O box.
The auditors do not notice fraud activity because of several reasons: lack of sense of the responsibility, lack of experience and training, too much familiarity with the client, failure to respond to red flags. The average loss of asset misappropriation is 125,000$ (Singleton 1-64).
Works cited
Singleton, Tommie and Aaron Singleton. Fraud Auditing And Forensic Accounting.
4th ed. Tennessee Technological University, 2012. Print.
