PPT On Fraudulent Financial Statement

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Fraudulent Financial Statement Presentation Transcript: 
1.Fraudulent Financial Statement

2.What is Financial Statement Fraud?
Deliberate misstatements or omissions of amounts or disclosures of financial statements to deceive financial statement users, particularly investors and creditors.

3.Indications of Financial Statement Fraud
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.
Misapplication of accounting principles & procedures.
Intentional omissions of disclosures or presentation of inadequate disclosures regarding accounting principles.

4.Costs of Financial Statement Fraud
More than 50% of U.S. corporations are victims of fraud with losses of more than $500,000 (Albrecht & Searcy 2001)
Enron lost about $70 billion in market capitalization to investors, employees, and pensioners
Enron, WorldCom, Quest,Global Crossing, and Tyco’s loss to shareholders was $460 billion (Cotton 2002)

5.Other Costs of Fraud
Other fraud costs  are legal costs, increased insurance costs, loss of productivity, adverse impacts on employee morale, customers’ goodwill, suppliers’ trust, and negative stock market reactions

6.Impacts of Financial Statement Fraud
Undermines the reliability, quality, transparency, and integrity of the financial reporting process
Jeopardizes the integrity and objectivity of the auditing profession.
Diminishes the confidence of capital markets, in the reliability of financial information
Makes the capital markets less efficient

7.Other impacts of Financial Statement Fraud
Adversely affects the nation’s economic growth and prosperity
Results in huge litigation costs
Destroys careers of individuals involved in financial statement fraud.
Causes bankruptcy or substantial economic losses

8.Financial Statement Fraud also:
Encourages regulatory intervention
Causes devastation in the normal operations and performance of alleged companies
Raises serious doubt about the efficacy of financial statement audits
Erodes public confidence and trust in the accounting and auditing profession