Fraud: Focus on Financial Statement Fraud – Part One

The Association of Certified Fraud Examiners (ACFE) fraud tree categorizes types of fraud schemes into three areas:

• Corruption
• Asset Misappropriation
• Financial Statement (FS) Fraud

Previous courses have addressed corruption and asset misappropriation. This course focuses on the areas of financial statement fraud related to revenue. Revenue processes can be complicated and provide an inherent opportunity for inappropriate activity.

Financial Statement fraud is the deliberate misrepresentation of the financial condition of an enterprise. It is accomplished through intentional misstatement or omission of amounts or disclosures in the FS to deceive financial statement users.  According to the ACFE’s Report to the Nation, in 2016, financial statement fraud comprised 9.6% of cases with a median dollar loss of $975,000.  The typical duration of financial statement fraud prior to detection is 24 months.

There are numerous methods under which revenue should be recognized.  Accordingly, there are numerous ways perpetrators try to side-step the process and override the proper revenue recognition requirements.  Financial personnel must remain vigilant and understand the types of financial frauds that can be perpetrated in their company.

Note: Information within this course comes from readily available public domain documents and is utilized by the trainer as a supplement for relaying the course content.