Exam (elaborations)
FOR3703 OCTOBER NOVEMBER PORTFOLIO (COMPLETE ANSWERS) Semester 2 2024 - DUE 31 October 2024
FOR3703 OCTOBER NOVEMBER PORTFOLIO (COMPLETE ANSWERS) Semester 2 2024 - DUE 31 October 2024
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
Content preview
,FOR3703 OCTOBER NOVEMBER PORTFOLIO(COMPLETE ANSWERS) Semester 2 2024 - DUE 31
October 2024; 100% TRUSTED Complete, trusted
solutions and explanations.
Scenario Financial statement fraud is a white-collar crime
usually perpetrated by management insiders to present a
company in a favourable fiscal light. Fraudsters are motivated
by personal gain such as performance-based compensation for
the enhancement of company’s reputation by misleading
potential investors. Or they want to buy time to correct their
financial mistakes or recoup their losses. Financial statement
fraud is a crime of opportunity. Companies with lax internal
controls, manual accounting systems or dishonest and overly
aggressive leaders are more likely to fall prey to it. The key to
combating financial statement fraud is to prevent it from ever
happening. If it cannot be prevented, it must be found as soon
as possible. Based on the information in the case study, answer
the following questions: 1.1. Discuss the different types of
financial statement fraud and explain why company personnel
commit it. Also indicate how financial statement fraud red flags
can signal potential fraudulent practices. (50) 1.2. Discuss the
methods to detect and prevent financial statement fraud. (50)
1.1 Different Types of Financial Statement Fraud and Reasons
for Its Occurrence
, Financial statement fraud can be classified into several
categories, each with distinct tactics aimed at misrepresenting a
company's financial health. The common types include:
1. Revenue Recognition Fraud: Manipulating how and when
revenue is recognized to inflate sales. Fraudsters might
prematurely record revenue, create fictitious sales, or
understate returns and allowances.
2. Expense Manipulation: Hiding expenses or recording them
in different periods to improve profit margins. This type
may involve capitalizing expenses (recording them as
assets) instead of recording them in the income statement.
3. Improper Asset Valuation: Inflating the value of assets on
the balance sheet, such as inventory or property, to
enhance the company’s perceived net worth. This can
include manipulating depreciation schedules or failing to
write down impaired assets.
4. Liability Concealment: Omitting or understating liabilities
to improve the company’s financial ratios. For example, a
company may hide loans or contingent liabilities to
enhance liquidity and solvency ratios.
5. Financial Statement Manipulation: This can involve
altering reports directly or reclassifying income, expenses,
or other financial items to meet desired financial ratios or
performance metrics.
Motivation Behind Financial Statement Fraud
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Novaace1. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R46,62. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
64438 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy summaries for 14 years now