Fraud: Focus on Financial Statement Fraud – Part Two

This course builds off Focus on Financial Statement Fraud part one.  It delves further into concepts of financial statement fraud as defined by the Association of Certified Fraud Examiners (ACFE).  The ACFE fraud tree categorizes types of fraud schemes into three areas:

• Corruption

• Asset Misappropriation

• Financial Statement (FS) Fraud

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.  In part one of this series, we focused on areas of revenue recognition.  This course will focus on other portions of the fraud tree under financial statement fraud including timing, concealed liabilities and revenue, overstated liabilities and expenses, improper asset valuation and improper disclosures.  Each of these areas are critical component for understanding financial statement fraud.

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