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Corporate financial statement fraud
Essay of financial statement fraud
Financial statement fraud essays
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Risk Management In today’s society risk management has become a requirement to companies instead of a choice. The collapse of several companies due to financial statement fraud over the years has shown companies that no one is immune or protected from having deficient or irrelevant risk management procedures or falling victim to financial statement fraud (Brown, et al., 2009, p. 546). Companies in any type of industry need to protect themselves from financial statement fraud and should have the ability to create a policy with the full recognition of risk and the creation of a relevant set of operating processes so management is able to answer to developing situations as they occur. Shad and Fong-Woon (2015) indicate that company executives …show more content…
116). A company’s risk management policy can also be seen as a form of governance (p. 116). Campbell notes that risk management can be seen as a form of governance because risk management assists in giving decision-makers the information needed to allow them to assign the necessary means that best balances the incentives and risks of a questionable future (p. 116). According to Minculete and Olar (2014), risk signifies the concern associated with the existence of an event that, when it takes place it changes the achievement of the company’s objectives (p. 102). Therefore, risk is not something that is guaranteed, however when associated with the company objective, which could have an adverse effect (p. …show more content…
(2012) notes that companies need to identify the risks associated to daily activities and establish a measure to acknowledge those risks by establishing a policy of acceptable internal control devices in order to alleviate the chance of the risks arising or the consequences if the risk has already emerged (p. 15). The process of identifying the risks must be consistent and concurrent, incorporated to the company objectives, activities, and processes carried out within the financial and accounting framework (p. 15). Additionally, in order for companies to carry out a successful risk management processes, regardless of the company hierarchy level, all employees and management must be aware of the risk management policy and the importance of the policy in order to assist the company in meeting goals and objectives and to assist in implementing, controlling, and monitoring the policy that is put into place (p. 16). Company executives or upper management must regularly review the risk of company daily activities, create and establish applicable procedures to assist with limiting the chance that a specific risk could occur, in addition to, determining the necessary actions required to incorporate the company objectives within the policy (p.
As a result, the topic of ‘risk management’ can be related to a biblical passage in The Book of Ecclesiastes, Chapter 11:5-6. According to Solomon, “As thou knowest not what is the way of the spirit, nor how the bones do grow in the womb of her that is with child: even so thou knowest not the works of God who maketh all. In the morning sow thy seed, and in the evening withhold not thine hand: for thou knowest not whether shall prosper, either this or that, or whether they both shall be alike good” (2009, p. 975). Thus, as stated previously, risk consists of uncertainty and risk management is the process of mitigating such risk in order to prevent counterproductive consequences. The Lord is the all-knowing entity throughout the universe, and
Business risk management has been a widely crucial tool for firms to include in their operations and its importance cannot be overlooked. In the case of British Petroleum (BP) Gulf of Mexico Oil Spill in 2010, there was negligence and lack in the contingency plan and response of the company to the risks that arose. It became evident in this analysis that BP’s manner of handling the incident had a massive financial implication that ensued negative public perception and company reputation and value.
Health and safety is paramount in a care environment. When working with people who are reliant on us to deliver them a high quality of care, we must ensure their safety comes first at all times. There are several ways in which we can always be sure we are keeping people safe at work and this is made possible by knowing current legislation and being clear on one’s own responsibilities. There are different roles within a care company for whom health and safety needs to be a priority. There are those of us on the front line; the care workers, those making the decisions for an individual’s care; the managers, and any visitors to the work place.
Risk management has become an integral part of the world of entrepreneurship. Generally, risks are events that have negative effects on a business. Some of the risks can jeopardize businesses, while others can cause serious and costly damages, which may need time to rectify. Not all risks are bad. According to Heldman (2011) risks can present future opportunities as well as future threats.
The word ‘risk’ can be defined as ‘the relevant uncertainty’. A more refined definition will be ‘the uncertainty that will affect one or more objectives which is in other words are relevant uncertainty’. It is common for the word ‘risk’ to be confused with uncertainty since it brings ambiguous meaning and feeling.
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 This includes but is not limited to; check forgery, inventory theft, cash or check theft, payroll fraud or service theft.
Identify the potential risks which affect the company and manage these risks within its risk appetite;
As the first step, identify potential risks plays a crucial role in the risk management process. The core purpose of identifying risk is to figure out causes of risk and analyze result caused by the risks and its probability . Hence, risk identification can begin with the source of problem, or with the problem itself. The chosen method of identifying risk may depend on culture, industry practice and compliance. The identification
Risk is an identified uncertainty related to any act or decision. Risk is the focal topic in the management of any activity, let it be technology, construction, health management or event management. These risks can comprise of threats and opportunities. Threats are risks with negative consequences and opportunities are risks with positive benefits.
(2015) examined the nature of financial statement fraud in a globalized market and found that typically management was the perpetrator of the fraud. In an international marketplace, it is still common to compensate managers with a fixed salary and a bonus based on company performance (Dimitrijevic et al., 2015). Compensating organizational managers based on company performance creates a potential risk, in that management may place self-interest before the best interests of the entity, which can lead to undesirable consequences, such as financial statement fraud (Dimitrijevic et al., 2015). Most frauds involved the income statement’s revenues and expenses, which management easily concealed (Albrecht, Holland et al., 2015; Dimitrijevic et al., 2015). False revenues included such activities as fictitious invoices, recognizing revenue in advance or postponing revenue recognition, and duplicated posting of invoices. False expenses included such activities as aggressive asset write-offs, increase/decrease depreciation expenses, improper capitalization, and deferring costs into another accounting
Risk: Risk is the major factor why IT governance is required. Risk is an uncertainty which can come anytime. There are so many risk factors which can come during execution of plans like
Ashbaugh-Skaife et al (2007), clearly understood reporting mechanisms exist to alert senior management to new and changing risks regarding financial statements, reliable controls are embedded in day-to-day operations to manage risks and to enable compliance with relevant legislative financial management requirements , ineffective or unnecessary controls are identified and replaced/corrected to reduce costs and/or reallocate resources and adequate monitoring of internal controls is in place to ensure that they are applied effectively and appropriate action is taken when control breakdowns are
Software has become critical to advancement in almost all areas of human endeavor. The art of programming only is no longer sufficient to construct large programs. There are serious problems in the cost, timeliness, maintenance and quality of many software products.
.... It is the directors’ responsibility to identify potential risks that the company is likely to face or risks already faced by the company. This is basically to prevent such risk to arise again that may negatively affect the company’s operation. By identifying the risks, it allows the company to prepare step by step solutions to prevent or overcome such risk beforehand. It also allows company to take control of risks before risks affect the company seriously.