Financial fraud of large corporations in early 2000th paralyzed the financial market in the United States. The regulators had to find ways to detect and prevent fraudulent reporting. To detect fraud, the auditors should use data-mining techniques and performance evaluation. For the fraud prevention, the auditor should analyze the elements of fraud triangle: opportunity, integrity, and motives. Fraudulent reporting, also known as a management fraud, aims improving the company results.
In today’s day and age, there is a lot of news that is related to corporate accounting fraud as companies intentionally manipulate their financial statements to show a better picture of their financial health. The objective of financial reporting is to provide financial information about a company to its various stakeholders such as investors and creditors so that these stakeholders can make decisions accordingly. Companies can show a better image of their financial well being by providing misleading information. This can be done by omitting material information from the books or deceitful appropriation of assets such as inventory theft, payroll fraud, check forgery or embezzlement. Fraudulent financial reporting will have an effect on the
The Enron Scandal escalated distrust amongst the shareholders, employees and government agencies. Thus, as a result the Sarbanes-Oxley Act was passed to protect the interest of all affecting parties. The Act is nearly "a mirror image of Enron: the company's perceived corporate governance failings are matched virtually point for point in the principal provisions of the Act." The Enron Scandal also revealed the unlawful practices followed by Arthur Andersen’s accounting firm. They helped Enron in altering, covering up, and destroying classified documents.
There are numerous forms of fraud, and it is far more sinister than raiding the petty cash drawer or the physical theft of inventory from the warehouse. The three classifications of fraud are fraudulent financial reporting, asset misappropriation, and corruption (Hedley). (#8). Reporting financial fraud is typically executed by managerial employees who deliberately misrepresent the company’s financial information by doctoring the financial statements. Asset misappropriation usually occurs on an employee level and involves embezzlement.
Corporate fraud is one category of financial fraud (Ngai et al, 2010). Wang et al. (2006) demonstrated the fraud as “a deliberate act that is contrary to law, rule, or policy with intent to obtain unauthorized financial benefit.”
Some of those frauds include Enron, WorldCom, Cendant, Adelphia, Parmalat, Royal Ahold, Vivendi, and SK Global. In most cases, the auditors were alleged to be the cause since it’s their responsibility to detect the fraud. Thus they were sued by stockholders for performing negligent audits. With the persisting issue of fraud in the discipline of accounting, a solution must be established. The government has stepped in and put in place regulations and laws that are meant to eliminate accounting fraud.
Corporate Fraud is an individual or a corporation’s willingness of illegal wrongdoings i... ... middle of paper ... ...calls, fax, etc. Below are some important “Red Flags” to consider: - If its sounds too good to be true, it is. - Guaranteed returns do not exist. - Beauty isn’t everything. - Pressure to send money right away.
There is usually shock and disbelief when fraud is discovered in a corporation. Fraud is a very general term that refers to the deliberate deception to secure an unfair or unlawful gain. Fraud involves a theft that the perpetrator often tries to conceal (Farrell and Franco 1999). The perpetrator then attempts to transfer the stolen assets or resources into personal assets or resources (Farrell and Franco 1999). In general, financial fraud is made up of four broad categories consisting of fraudulent financial reporting, misappropriation of assets, expenditures and liabilities for inappropriate intentions, and fraudulently obtained revenues and assets that include avoided costs and expenses (PricewaterhouseCoopers 2008).
Credit card fraud taking unauthorized credit card information to charge purchases to an account or to eliminate the capital from it called identity theft. Furthermore, credit Card Fraud is a comprehensive term which use for stealing and scheme dedication by using a credit card as a fake source of capitals in a business. The purpose of such action is to gain unconstitutional or illegal assets from an account in order to acquire properties without paying. Besides, Identity theft is a form of identity hold-up in which someone pretends to be someone else by having someone else’s identity and credit card fraud is similar to identity stealing (Wikipedia, 2013). As a detection process, United States Federal Trade Commission, clarity that credit card fraud for identity theft was steady in 2008, but in the past few years 21 percent increased.
Refund Fraud Refund fraud occurs when people dishonestly claim refunds, rebates or offsets they aren't entitled to. This can happen in a range of ways, from claiming fictitious expenses, to creating false documentation to support a claim. Some individuals lodge fraudulent claims in their own name or for their business; others lodge a claim on behalf of another person. Identity crime related to refund fraud is an increasing problem, with stolen identities used to lodge false income tax returns and activity statements with the aim of fraudulently getting refunds. Refund fraud cheats the whole community and disadvantages those who do the right thing.