Financial Statement Frauds

29904 Words120 Pages
Accounting and Finance
Master Thesis No. 2002:53

Financial Statement Fraud

- Recognition of Revenue and the Auditor’s Responsibility for Detecting Financial Statement Fraud -

Tiina Intal and Linh Thuy Do

Graduate Business School School of Economics and Commercial Law Göteborg University ISSN 1403-851X Printed by Elanders Novum

Abstract
Financial reporting frauds and earnings manipulation have attracted high profile attention recently. There have been several cases by businesses of what appears to be financial statement fraud, which have been undetected by the auditors. In this thesis, the main purpose is to identify some of the reasons why auditors have not detected financial statement fraud and to suggest possible
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16 3 Financial Statement Fraud: Earnings Management and Revenue Recognition .............................................................................................. 17 3.1 Introduction ................................................................................ 17 3.2 Definition – Financial Statement Fraud ..................................... 18 3.3 The Auditor’s Responsibilities for Detecting Fraud.................. 19 3.4 Assessing Risks of Fraud ........................................................... 21 3.5 Definition – Earnings Management ........................................... 27 3.6 Earnings Management – Revenue Recognition......................... 28 3.7 Summary .................................................................................... 31 4 Case Analysis. Why Auditors Have Not Detected Fraud? ............... 33 4.1 Introduction to Three Case Studies............................................ 33 4.2 Analysis of the Three Cases....................................................... 35 4.3 Reasons Why Auditors Have Not Detected Fraud .................... 48 4.4 Summary .................................................................................... 60 5 Recommendations For Improving the Audit Process....................... 65 5.1 Introduction ................................................................................ 65 5.2 Empirical Findings
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