Essay on Fraudulent Financial Reporting Schemes

As you can see from this mock Balance Sheet of our business, it (1) has enough assets to pay our debts when they are due, and (2) the claims of short and long-term creditors on

The fraud accounting practice is the main problem incurred at WorldCom. The company had focus more on increasing the revenues and acquiring capacity sufficient. As the market conditions was worst in 2000, it severe the pressure on WorldCom’s E/R ratio closely monitored by analyst and industry observer. Thus, the management must find out the solution to overcome it. Unfortunately, WorldCom had chosen the wrong and illegal ways to solve their problems. Based on the article, there are 2 main accounting tactics used to achieve target performances which are accrual releases in 1999 and 2000 and capitalization of line costs in 2001 and 2002.

The most common accounting fraud is the misrepresentation of financial statements which is frequently known as “cooking the books” and includes manipulation, falsification, or alteration of accounting records, intentional omission from the financial statements and intentional misapplication of accounting principles relating to amounts, classification, manner of presentation, or disclosure.

Fraudulent financial reporting is one form of corporate corruption and may involve the manipulation of the documents used to record accounting transactions, the misrepresentation of accounting events or transactions, or the intentional misapplication of Generally Accepted Accounting Principles (GAAP) (Crumbley, Heitger, and Smith, 2013). Examples of fraudulent schemes befitting of this category abound and usually involve financial statement items that have been misclassified, omitted, overstated, undervalued, or prematurely recognized. One case involving CEO Bill Smith of Moonstay

The amount listed is the enrollment agreement was 10,020.00 which gives a difference of :

As a firm's sales grow, its current assets also tend to increase. For instance, as sales increase, the firm's inventories generally increase, and purchases of inventories result in more accounts payable. Thus, spontaneous liabilities that reduce AFN arise from

Congress has discovered that the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 that created the Consumer Financial Protection Bureau or CFPB is fatally flawed and dangerous to traditional banking interests, politicians and lenders. The Huffington Post reports that ther bureau has become everybody's favorite target for reform or abolishment, and these stakeholders include people from opposite asides of the political specturm like the American Bankers Association and banking-system critic Rep. Spencer Bachus (R-Alaska). The CFPB, which was expected to target payday and predatory lenders,

11-2: The three main groups of people who commit financial statement fraud are organized criminals, mid- and lower-level employees, and senior management (Wells, 2013, p. 274). Senior management such as the CEO and CFO typically commit fraud to meet the expectations of Wall Street, preserve status, and/or receive performance bonuses (Wells, 2013, p. 274). Middle management will falsify financial statements in order to receive performance bonuses (Wells, 2013, p. 274). While organized criminals will try to obtain loans or engage in a pump-and-dump scheme (Wells, 2013, p. 274).

The manipulation of accounts fraud scheme is generally fulfilled by employees in top management positions and it usually involves making understatements or overstatements on financial statements making it very hard to detect. The process followed as Troy Adkins, (2015) explains is very simple. The financial statements are either overstated to show different figures in the earnings on the income statements making them look better than they actually are or the earnings in the current periods are manipulated in such a way that the revenue is understated or they inflate the current year’s expenses. The second process includes making the financial statements look worse than they are in reality. Deloitte, (2009) explains a number of ways which the accounts are manipulated where as one of the ways is to manipulate the reported earnings directly. They further explained that overstating the

Excello Telecommunications was presented with a dilemma on how the company should report earnings so that they would appear to have met earning estimates for the 2010 financial year. The CFO, Terry Reed, was concerned with how failure to meet earning estimates would affect bonuses, stock options, and the share price of Excello stock. On December 201, 2010, the company sold $1.2 million of equipment to Data Equipment Systems. However, Data Equipment Systems requested that Excello hold on to the product until January 11, 2011, because they do not have the

Moving onto the balance sheet, it is safe to assume that the cash position in the firm will increase the rate of the sales growth going forward. In actuality, cash has historically increased faster than the growth of revenue with 2004 being an exception. To calculate the assumption for accounts receivable, inventory, and accounts payable, we averaged the four years worth of data

The first article researched was The Anatomy of Corporate Fraud: A comparative Analysis of High Profile American and European Corporate Scandals. The abstract discusses the analysis conducted on the three major American accounting scandals; Enron, WorldCom, and HealthSouth, and compares to the three major European accounting scandals; Parmalat, Royal Ahold, and Vivendi Universal. Bahram Soltani (2014), also discusses within the abstract the different areas reviewed regarding why the accounting scandals occurred; ethical climate, tone at the top, bubble economy and market control, fraudulent financial reporting, accountability, control, auditing, governance, and management compensation (p. 251).

Financial statement fraud is any intentional or grossly negligent violation of generally accounting principles (GAAP) that is undisclosed and materially effects any financial statement. Fraud can take many forms, including hiding both bad and god news. Research shows that financial statement fraud us relatively more likely to occur in companies with assets of less than $100 million, with earnings problems, and with loose governance structures (Hopwood, Leiner, & Young, 2011).

Assets in the financial statement are always required and show useful information to investors and understand where the information comes from. For instance, accounts receivable net which the organization does not expect to collect all of the money it is due from all patients and insurers, (Finkler, S.A., Ward, D.M. & Calabrese, I.D., 2013). The bad debts become about of the money due. Furthermore, accounts receivables, net represents gross charges less an allowance for poor debts, and many contractual allowances established with those third party payers. Typically, an example of a bad debt would show charges of a large sum of money delivered from a hospital. Then, the contractual allowances from

A business can not work out without an account system, which includes internal. Internal controls are used by companies to make sure financial information is accurate and valid. Strong internal controls are signs of a financially healthy company and protect the company’s integrity. Strong internal controls can also increase a company’s profitability. There are several types of internal controls that companies used to protect themselves such as: Segregation of duties, asset purchases, supervisor review, internal audits and adequate documents and records. This paper will discuss several topics from a case study about And the Fraud