Manipulation Of Accounts Fraud Scheme

After reviewing the financial information of the Tech Tennis, USA, there was a concerned due to some unusual changes in the company’s accounts. Financial statements play a crucial part in the determination of the progress of an organization. It assists the relevant personnel to identify whether the company is making profits or making losses. Although unethical, some companies will tend to deliberately misrepresent some of their financial statement information to create a false impression of the company’s success. There are various techniques that organizations utilize to manipulate their financial statements such as overstating their revenues (Bierstaker, Brody, & Pacini, 2006). In addition, some organization will tend to inflate their sales without considering their cash flow amount that the organization has acquired which will be a red flag to investigate. Consequently, financial statements provide vital information that helps both internal and external users to understand the position of the organization. Some companies in an attempt to continue in the market, they end up manipulating their financial statements that create an illusion of the success of the organization.

1. Fraudulent financial reporting – reporting false financial performance and overstating the company’s earnings and falsifying the level of liabilities to attract investor’s contributions.

In the case of Phar-Mor fraud, the company was involved in cover up and some accounts were created to hide the fraudulent activities. Bad inventory counts in the stores were made to help with the cover up and deceit about activities that cost hundreds of millions of dollars. (Williams, S.L., 2011)

Fraudulent financial reporting is an intentional misstatement or omission of amounts or disclosures with the intent to deceive users. Two examples of fraudulent financial reporting are accelerating the timing of recording sales revenue to increased reported sales and earnings, and recording expenses as fixed assets to increase earnings.

There were 347 alleged cases of fraud involving public company according to Fraudulent Financial Reporting: 1998-2007 sponsored by Committee of Sponsoring Organizations of the Treadway Commission (COSO, 2010) that were investigated by Securities and Exchange Commission (SEC) on May 2010, which is showing 53 increased in the number of fraud when compared to the 1987-1997 study (p.5). COSO’s result is a sad number in a 10 year period, which averaging close to 35 accounting frauds a year (p.5). COSO’S study shows out of the nearly 350 financial frauds investigated 60% were identified to involved improper revenue recognition and 89% were recognized the CEOs and/or CFOs involvement (p.5). COSO’s research

The financial fraud, which took place at Waste Management Inc., brought a number of changes in the accounting world which are being experienced currently in the world. First, it awakened investors to the crisis in the accounting world. For instance, Roger Hamilton, a manager of John Hancock Value Funds, succeeded in unloading $600,000 of his shares before total collapse of stock, even though he

Fraud is a false representation that is used to gain advantage or secure personal gains. While there are many different schemes used in committing fraud, the most commonly used fraud schemes are billing schemes, expense reimbursements, check tampering schemes, payroll schemes, and register disbursements. Billing schemes are the most common and are used in conjunction with fake or altered invoices for fictitious goods or services or personal activities. Check tampering is the scheme that carries the highest median loss and is committed by acquiring the funds of the organization and using them for personal activities. Payroll schemes involve falsifying compensation requests, such as timecards for fictitious or terminated employees and collecting

In Australia finance executives manipulate the financial records by using cookie jar reserve to inflate profits and fail to record expense. The Australian company overstated operating income in 2009 by 5% to meet analyst earning target. The CFO Wayne Banks agree to settle the charge and pay “disgorgement of $10,990 with prejudgment interest of $2,400, plus accept an officer-and-director bar of at least four years as well as a bar from practicing as an accountant on behalf of SEC-regulated entities for at least four years (SEC, 2015).” In CSC Nordic region and Denmark, it was also found that senor executive used financial manipulation and fraud to inflate operation results in the HNS

Fraudulent financial reporting has gained substantial attention from the public after the scandals of many high profile companies in the 21st century. Periodic cases of financial statement fraud raise concerns about the credibility of financial reports and are as a result of problem in the capital markets, a dropping of shareholder value, and, the bankruptcy of the company. Thus, to respond to the public pressure over acts of corporate offense, the Sarbanes-Oxley Act (SOX) was enacted in 2002. SOX proposed major changes to the regulation of corporate governance and financial reporting by improving the accuracy and reliability of company disclosure. This essay will explain the effects of SOX on the financial statement fraud in an organization.

Financial statement fraud occurs when financial statements are intentionally misstated in order to make an organization appear better off than it actually is. This not only includes misstatements but also information that is intentionally omitted or improperly stated. The two sub-categories of financial statement fraud are asset/revenue overstatements and understatements. Financial statement fraud is the least common type of fraud, occurring in 9% of the cases studied in 2014, but the most costly with a median loss of $1,000,000. (Report to the Nations,

Financial shenanigans are used to hide or distort the real financial performance or financial condition of an entity. Such techniques are often referred to as “window dressing” or “cooking the books”. Those shenanigans range from minor deceptions (such as failing to clearly segregate operating from non-operating gains and losses) to more serious misapplications of accounting principles (such as failing to write off worthless assets; they also include fraudulent behavior, such as the recording of fictitious revenue to overstate the real financial performance). Since management is clever about hiding its tricks, investors and others must be alert for signs of shenanigans.

Members of management, and in some cases, members of the board, had created slush funds for the purpose of making these payments. The books of these companies were improperly maintained, and the financial statements were deliberately misstated, in order to conceal the

Evaluate whether the selection and application of accounting policies by the entity, particularly those related to subjective measurements and complex transactions, may be indicative of fraudulent financial reporting resulting from management’s effort to manage earnings

This research conducted on the investigation of a world wide known company WorldCom, a company that had stolen billions in dollars from investors, competitors, and employees financial, to help live the senior managers lives more luxurious. This research paper will go more in depth to why the CEO Bernard Ebbers and the CFO Scott Sullivan committed financial statement fraud to benefit themselves. This will tell us behind the scenes of the investigation conducted against WorldCom and the consequences suffered to those who committed and helped with the fraud and how to this day WorldCom is still successful.

Financial statement fraud is usually a means to an end rather than an end in itself. When people "cook the books" they may doing it to "buy more time" to quietly fix business problems that prevent their entities from achieving its expected earnings or complying with loan covenants (Fraud Magazine, 2014. It may also be done to obtain or renew financing that would not be granted or would be smaller if honest financial statements were provided. People intent on profiting from crime may commit financial statement fraud to obtain loans they can then siphon off for personal gain or to inflate the price of the company 's shares, allowing them to sell their holdings or exercise stock options at a profit (Fraud Magazine, 2014). However, in many past cases of financial statement fraud, the perpetrators have gained little or nothing personally in financial terms. Instead the focus appears to have been preserving their status as leaders of the entity - a status that might have been lost