ACC 555 Exam 3
Statement on Auditing Standards (SAS) No.99 (Defining Financial Statement Fraud)
"Consideration of Fraud in a Financial Statement Audit" -Misstatements arising from fraudulent financial reporting -Misstatements arising from misappropriation of assets Deliberate/intentional misstatements or omissions of amounts or disclosures of financial statements to deceive financial statement users, particularly investors and creditors
Bid-Rigging Schemes
"Inside influence" - competing vendors want this ability to influence purchasing decisions Competitive bidding process - on the surface looks legitimate but employee can influence decision Can occur in any stage of process - categorized based on the stage in which fraudster exerts his influence -Pre-solicitation phase -Solicitation phase -Submission phase
Completed Contract Method vs Percentage of Completion Method
*Completed Contract Method* Does not record revenue until completion of the project is 100% complete Construction costs are held in an inventory account until completion of the project *Percentage of Completion Method* Recognizes revenues and expenses as measurable progress on a project is made Vulnerable to manipulation Used to prematurely recognize revenues and conceal contract overruns
Easiest method of concealing liabilities/expenses because they are legitimate transactions that are never recorded
*Liability/expense omissions* Among the most difficult financial statement schemes to uncover Perpetrators often believe they can conceal their fraud in future periods because things will get better and be matched with future revenues
Bid-Rigging Scheme Stages
*Pre-solicitation phase* Need recognition schemes -Employee of buyer recognizes a "need" for a particular product or service Victim company purchases unnecessary goods or services Specifications schemes -Fraudulent tailoring of specifications to a particular vendor -"Prequalification" procedures -Sole-source or noncompetitive procurement justifications -Deliberate writing of vague specifications -Bid splitting -View specifications earlier than competitors *Solicitation phase* Restriction of the pool of competitors Bid pooling - bidders split up contracts to ensure everyone wins a piece of the work Fictitious suppliers Other methods -Restricting time for submitting bids -Solicit bids in obscure publications *Submission phase* Sealed-bid process -View competitors bids before submission -Information on how to prepare their bid
Qualitative Characteristics (2)
*Relevance and Reliability* Required for accounting information to be useful in decision making. Relevance requires certain information is needed to make decisions. Reliability focused on the dependency of the information to make that decision *Comparability and Consistency* Consistent methods of accounting for information for asset and income valuation. Use of a standard and consistent depreciation method, inventory valuation method, etc. results in consistent and comparable financial information
Two types of 'conflict of interest' schemes associated with victim company's sales
*Under-billings* Sell goods or services below fair market value to vendor with a hidden interest Diminished profit margin *Writing off sales* Tamper with victim company's books to write off amount owed by an employee's business Delay billing
Methods to detect FS fraud (3. Financial Statement Analysis)
*Vertical analysis (percentage analysis)* Analyze relationships between items on income statement, balance sheet, or statement of cash flows *Horizontal analysis (percentage analysis)* Analyze percentage change in individual financial statement items from one year to the next *Ratio analysis* Measure relationship between 2 different financial statement amounts *Important*
See non-hidden slides
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Statement of Financial Accounting Standards No. 154 states three types of accounting changes that must be disclosed:
1) Accounting principles 2) Estimates 3) Reporting entities
2 broad categories of bribery schemes
1) Kickbacks 2) Bid-rigging schemes
3 common methods for concealing liabilities and expenses & 2 elements
1) Liability/expense omissions 2) Capitalized expenses 3) Failure to disclose warranty costs and liabilities Significant impact on reported earnings to make a company appear more profitable Easier to commit than falsifying sales transactions because a lack of an audit trail
Expensing capital expenditures (2)
1) Minimize income in current year for tax considerations 2) Increase income in future periods
Three main groups of people commit financial statement fraud
1) Senior management - CEO's involved in 72% of fraud, CFO's in 43%. Either CED/CFO 83% 2) Mid and lower-level employees - financial fraud at the subsidiary/division/unit level 3) Organized criminals -getting fraudulent loans from banks, hyping worthless stocks, etc.
There are four methods by which employees typically abuse this process to generate fraudulent reimbursements:
1. Mischaracterized expense reimbursements 2. Overstated expense reimbursements 3. Fictitious expense reimbursements 4. Multiple reimbursements
Related-Party Transactions
A related-party transaction occurs when a company transacts with an entity that is controlled or significantly influenced by company. Also called "self-dealing" Nothing inherently wrong with transactions as long as they are disclosed and arms length
most forgery schemes done by
A/P clerks, office managers, bookkeepers
Materiality Constraint
According to GAAP this is a user-oriented concept. If a prudent user believes that a different decision would be reached if given correct information then considered "material"
Four things must occur for a ghost employee scheme to work
Adding the Ghost to the Payroll - Person with authority (manager) adds fictitious persons through payroll or Payroll Accounting could make corrections (or add employees if poorly controlled), paying terminated employees Collecting Timekeeping Information - payroll documentation to be created for payment, payroll should be reviewed, easier to create for salaried employees but harder to conceal Issuing the Ghost's Check - usually through the normal course of payroll disbursement Delivery of the Paycheck - segregate the payroll distribution function from any function in the payroll cycle (employee setup, payroll recordkeeping, payroll approval) *Think, what is ghosting and what would be involved?*
4 req's to recognize revenue (is realized/earned)
All the following criteria must be met -Persuasive evidence of an arrangement exists -Delivery has occurred or services have been rendered -The seller's price to the buyer is fixed or determinable -Collectability is reasonably assured
Overstated Expenses
Altered Receipts - change receipt amount to reflect a higher cost Over-purchasing - Purchase two tickets, use the cheaper ticket and credit the other ticket Overstating Another Employee's Expenses - dealing with cash so person can get their "cut", petty cash custodian changes expense amount Orders to Overstate - manager instructs subordinate to overstate expenses, approves expenses and shares overstatement
How to conceal inventory shrinkage (5)
Altered inventory records and end of year physical inventory counts Understating value of physical inventory Fictitious sales and accounts receivables Write off inventory before/after inventory counts and other assets Physical padding - counting empty boxes, drums
Invoice Purchasing Schemes: Altering Existing Purchase Orders
Altering Existing Purchase Orders - altering quantitieswith no comparison to work orders or other project/inventory information
One of five methods used in receivables skimming: Lapping
An accounting method that involves altering the accounts receivable section of the balance sheet when cash that is intended for the payment of a receivable is stolen. The method involves taking the first receivable collected and using that to cover the theft, while the second receivable collected is accounted to the first, the third receivable to the second, and so on.
Corruption Schemes: 4 Classifications
Bribery - Offering payment Illegal gratuities - Reward employees Economic extortion - Demand payment Conflicts of interest - Undisclosed relationship
Altered Inventory Records
Change the perpetual inventory record so that it will match the physical inventory count (a.k.a "forced reconciliation") Result: appearance that no shortage exists
Invoice Purchasing Schemes: Charge Accounts
Charge Accounts - being replaced by company credit cards due to lack of controls. Require receipt to be signed by supervisor
Mischaracterized Expenses
Claim personal expenses are actually "business-related". Most companies have reimbursement policies
Fictitious Sales and Accounts Receivable & Issue created
Create fake sales to mask the theft of assets Issues created: Uncollectible accounts receivable (or missing cash)
Self Approval of Fraudulent Invoices
Creating authorization for fictitious purchase is the key for fraudulent payments Fraudster in a position of approval Forgery could occur when multiple approvals are necessary -Payments requiring purchase orders -Payments over certain dollar thresholds Check Requests should be especially reviewed - no documentation except authorization needed
Register Disbursement Schemes: Credit Card Refunds
Credit Card Refunds - uses personal credit card to charge refund (safer than cash refunds)
great place for concealing stolen deposits
Deposits in transit
Billing Schemes: Personal Purchases with Company Funds
Differs from inventory theft in that goods purchased are not taken from inventory. - the asset taken is superfluous to company operations, only damage is money lost to the company Personal Purchases through False Invoicing - submit bill to employer as if it is on behalf of the company The Fraudster as Authorizer of Invoices - proper controls should preclude anyone from approving his own purchases
Improper Disclosures & list of 5
Disclosures are supposed to prevent user of financial statements from being misled Disclosures include narratives, supporting schedules, and other Improper disclosures relating to financial statement fraud -Liability omissions -Subsequent events -Management fraud -Related-party transactions -Accounting changes
Other Conflicts of Interest Schemes: Resource Diversions
Divert funds of their employers to the development of their own business
Turnaround sales
Employee knows ahead of time of a needed asset purchase Employee purchases asset then resells it to employer at an inflated price
Check Tampering Schemes: Concealed check schemes
Employee prepares fraudulent check and submits it, along with legitimate checks, to an authorized maker who signs it without proper review Check signer does not realize the critical role he/she plays in the cash disbursement process Perpetrator is the preparer of checks Deliver large number of checks and busy time of day and stress urgency Perpetrator hides payee name by fanning checks out to show only the place to sign checks, not payee
Check Tampering Schemes: Authorized maker schemes
Employee with Signature Authority writes fraudulent checks without review through: Overriding Controls through Intimidation - high ranking employees use authority to override check preparation controls Poor Controls - lack of segregation of duties in the A/P process, critical to segregate the check preparation and check signing and also the bank reconciliation process Preventing and Detecting Check Tampering by Authorized Makers - check signer is critical control against fraud, require dual signatures, controls over vendor lists Concealing Check Tampering - proper segregation of duties in disbursement process and/or require dual signatures The Fraudster Reconciling the Bank Statement
The Perception of Detection
Employees who perceive that they will be caught engaging in occupational fraud and abuse are less likely to commit it A control is only effective if a fraudster believes that the control will uncover the fraud Deal with occupational fraud and abuse in an open forum If not handled correctly, it can cause more problems than it solves
The Human Factor
Establish clear and reasonable antifraud standards Human failings lead trusted people to violate trust No one factor alone will deter occupational fraud Greed - as compared to what? Wages in kind - Hire the right people, treat them well, don't subject them to... Unreasonable expectations - People are human, people will lie, don't try to change the human condition but create conditions that deter fraud
Pressures to Boost Revenues (2)
External pressures to succeed often provide motivation to commit fraud -Loan requirements by banks Pressures to commit financial fraud may also be internal -Departmental budget requirements
Current conceptual guidelines for revenue recognition
FASB Concepts Statement No. 5 "Recognition and Measurement in Financial Statements of Business Enterprises" FASB Concepts Statement No. 6 "Elements of Financial Statements" FASB and IASB have partnered to tackle issue of revenue recognition
Cost-Benefit Constraint
FASB has considered the cost of collecting, distributing and auditing data in financials versus the benefit of the derived by users of information. No excuse for fraudulent reporting but used to keep information from competitors
Improper Disclosures: Liability Omissions
Failure to disclose loan covenants -Agreements that borrower has promised to keep as long as financing is in place -Ratio limits or restrictions on other financial agreements Failure to disclose contingent liabilities -Potential liabilities that will materialize only if certain events occur in the future
False Purchase Requisitions
False Purchase Requisitions - misrepresent what is needed to purchase and be able to "receive" goods. Must segregate the purchase and receipt functions.
Register Disbursement Schemes: False Voids
False Voids - using legitimate customer receipt, voids sale and gives to manager for approval False voids/refunds create two things -Cash removed from register -Inventory should be returned to inventory For small but consistent false voids/false refunds, fraudster will hope it is considered "shrinkage" For large false voids/false refunds fraudster will try to adjust perpetual (book) inventory prior to physical count Fraudster destroys all record of transaction to keep management from determining thief.
Financial statement fraud may involve the following schemes: (4)
Falsification, alteration, or manipulation of material financial records, supporting documents, or business transactions Material intentional omissions or misrepresentations of events, transactions, accounts, or other significant information from which financial statements are prepared Deliberate misapplication of accounting principles, policies, and procedures used to measure, recognize, report, and disclose economic events and business transactions Intentional omissions of disclosures or presentation of inadequate disclosures regarding accounting principles and polices and related financial amounts
Invoice Purchasing Schemes: Falsifying Documents to Obtain Authorization
Falsifying Documents to Obtain Authorization - generate false/forged purchase orders/requisitions (controls over purchase order documents)
Register Disbursement Schemes: Fictitious Refunds/Returns
Fictitious Refunds/Returns - fraudster process a transaction as if merchandise has been returned , inventory is overstated if not counted and reconciled regularly
Billing Schemes: Shell Company Schemes
Fictitious entities created for the sole purpose of committing fraud. -Fabricated names -Post Office Boxes Perpetrator sets up phony bank account in the name of the shell company and becomes authorized signatory To form one..... Obtain legitimate documents to give the look of an law-abiding company Perpetrator will hide identity of corporate ownership/bank accounts under fictitious name Use of a PO Box or home address -Businesses wary of sending checks to PO Boxes without a street address Submission of false invoices - Use of professional printer or personal computer using software can create legitimate looking invoices
Types of Fraudulent Financial Statement Schemes (5)
Fictitious revenues Timing differences Concealed liabilities and expenses Improper disclosures Improper asset valuation
One of five methods used in receivables skimming: Force Balancing
Force balancing - fraudster receives and posts and possibly reconciles, makes adjustments to hide cash shortages
Check Tampering Schemes: Forged endorsement schemes
Forged endorsement schemes involve an employee intercepting a company check intended for a third-party and converts the check by signing the third-party name or employee's name as 2nd endorser *Differs from Forged Maker Schemes in that employee is tampering with a prepared check* Fraudster main issue is gaining access to prepared checks -Must steal check between signing and delivery through stealing outright or rerouting to different location
Kickback Schemes: Over-billing
Fraudsters with Approval Authority -Kickback schemes often begin as over-billing schemes -Vendor submits inflated invoices to victim company -Overstate cost of goods or services or reflect fictitious sales -Employees with approval authority negotiate with vendor Fraudsters lacking approval authority -Weak controls allow this to occur with weak controls -Confirming purchase orders Other kickback schemes -Slush funds, monies needed to pay bribes/kickbacks
One of five methods used in receivables skimming: Fraudulent write-offs/discounts
Fraudulent write-offs or discounts - credit adjustments to balance sheet accounts (e.g., accounts receivable)
Preventing and Detecting Shell Company Schemes (4)
Identifying Shell Company Invoices -Lack of detail on invoices -Sequential invoice numbering Testing for Shell Company Schemes -Accounts Payable analysis (see above) -Budget vs Actual Comparison - expense trend analysis -Appropriateness and amount of consulting services Verifying Whether a Shell Company Exists -Verify phone number (if identified) Identifying the Employee behind a Shell Company -Registration of company with Secretary of State -Match payroll information with shell company
Expense Reimbursement Schemes
In Expense reimbursement schemes, the fraudster attempts to have their company pay for personal expenses through reimbursement
Corruption Schemes: Define
Intent to give some advantage inconsistent with official duty and the rights of others
Non-cash misappropriations
Intentionally purchased but misappropriated by the fraudster - company uses part of purchase
Why would there be negative inventory?
Intentionally purchased but misappropriated by the fraudster - company uses part of purchase
Check Tampering Schemes: Altered payee schemes
Interception of Company Check and alter payee for conversion to employee or accomplice Altering Checks Prepared by Others: Inserting a New Payee - Crossing out vendor name, changing name in A/P system Altering Checks Prepared by Others: ''Tacking On'' - adding words and letters to payee name Altering Checks Prepared by the Fraudster: Erasable Ink - prepare check with legitimate vendor and after signature, erase payee to fraudulent name Altering Checks Prepared by the Fraudster: Blank Checks - maker signs check without payee identified
Accounts affected/incorporated into skimming
Inventory Returns Discounts AR write-offs/voids sales G/L
Commercial Bribery
Involves a business decision rather than an act of government. Differs from bribery in that it is normal for payments to influence business decisions; however, Payments are made without employer's consent
Multiple Reimbursement Schemes
Least common expense reimbursement scheme This type of fraud involves the submission of a single expense several times to receive multiple reimbursements The most frequent example of a duplicate reimbursement scheme is using the airline ticket and travel agency itinerary separately for one flight Prevention/Detection from Multiple Reimbursement Schemes -Organizations should not accept photocopied receipts -Credit card statements should not be allowed as "documentation" -Approval from manager's with oversight
Preventing and Detecting Sales Skimming (5)
Maintain effective oversight presence when cash enters organization Customer complaints and tips - discounts offered if no receipt given Cash register log-in and log-out times Activity logs for off-site personnel - Routine follow-up of activity for validation Reduce perceived opportunity to steal -Eliminate "blind spots" in cash receiving areas - cash entry points visible to employees -Eliminate areas where stolen cash can be hidden
Physical padding
Make it appear that there are more assets present Example: Empty boxes in warehouse. Set up a "wall" of product where nothing behind the wall exists
Other Conflicts of Interest Schemes: Financial Disclosures
Management obligation to disclose fraud committed by employees in positions of trust Inadequate disclosure can be among the most serious of frauds
Window Dressing
Misclassification of long-term assets as current assets to secure financing
Improper Disclosures: Management Fraud
Must disclose fraud committed by officers, executives, and others in position of trust Withholding such information likely involves lying to auditors, an illegal act
Why falsify shipments? (3)
No risk of being caught stealing on site Victim company unknowingly delivers targeted assets Understate legitimate sales so accomplice is billed for less
After-hours sales
Open stores earlier than manager intended
Preventing/Detecting Fraudulent Invoices from a Non-accomplice Vendor (4)
Organizations should maintain up-to-date approved vendor lists that include contact and mailing information for approved vendors Pay-and-return schemes can be mostly prevented if the duties of purchasing, authorizing, and distributing payments are separated and if all invoices are matched to purchase orders before payments are issued. Institute effective duplicate payment process to identify rerun vouchers Instruct banks not to "cash" checks made out to the organization
Methods of Falsifying Invoices: Collusion
Overrides segregation of requisitioning/approval, purchasing, receiving, and payment
Register Disbursement Schemes: Overstated Refunds
Overstated Refunds - overstate the amount of the legitimate refund while paying customer legitimate amount owed
Billing Schemes: Non-accomplice Vendor Schemes
Pay-and-Return Schemes -Employees intentionally mishandle payments that are owed to the legitimate vendors through -Double payment with request to return duplicate -Pay wrong vendor with request to return -Overpay vendor and request return difference Overbilling with a Nonaccomplice Vendor's Invoices -Generate phony invoices in the name of an existing vendor (kickbacks if vendor participates) -Rerun an existing invoice
Check Tampering Schemes: Forged maker schemes
Person who signs checks is the "maker" -Forged maker schemes - an employee misappropriates check and affixes signature of authorized maker on check -Unauthorized employee needs access to blank checks, produce a convincing forgery, and then conceal activity -Concealment is the challenge
Invoice Purchasing Schemes: Personal Purchases on Credit Cards or Other Company Accounts
Personal Purchases on Credit Cards or Other Company Accounts - Prior approval not required. Statement review critical. Segregate authorization (cardholder) and recordkeeping (ie.e, statement). Statement must be reviewed by someone other than cardholder Cardholder security must be maintained
SEC Staff Bulletin No. 104
Persuasive evidence of an arrangement does not exist Delivery has not occurred or services have not been rendered The seller's price to the buyer is not fixed or determinable Collectability is not reasonably assured
False billings
Purchase merchandise that company doesn't need
Majority of conflict schemes fit into 2 categories
Purchasing schemes - company buys high Sales schemes - company sells low
Revenue is recognized when
Realized or realizable Earned
Fraudulent FS Schemes: Timing Differences
Recording of revenues and/or expenses in improper periods Shift revenues or expenses between one period and the next -Increase or decrease earnings as desired
Fraudulent FS Schemes: Fictitious Revenues
Recording of sales of goods or services that did not occur Artificially inflate or alter invoices of legitimate customers
Register Disbursement Schemes
Removal of money is recorded on the register tape through the use of false refunds or false voids.
Industry Practice Constraint
Reporting practices may differ from GAAP in order to provide fair presentation. For example, utilities list non-current assets first on balance sheet
Invoice Purchasing Schemes: Returning Merchandise for Cash
Returning Merchandise for Cash - air travel purchases - purchase tickets for family members or air travel that was scheduled but not occurring.
Preventing and Detecting Forged Maker Schemes
Review checks made payable to an employee (except payroll) and "cash" Forging the signature - most banks do not verify signatures nor organizations verify cancelled checks. Rotate duties of authorized check signers Periodic verification of signature by authorized check signers Periodically review endorsements for employee signatures Segregate the duties of check preparation/issuance with cash record-keeping and bank reconciliation If checks are computer-generated, safeguard IT access to check generation Bank reconciliation should review for out-of-sequence or duplicate check numbers
Sales with Conditions
Sale is booked even though -Some terms have not been completed -The rights and risks of ownership have not passed to the purchaser Recorded in an effort to fraudulently boost a company's revenue Do not qualify for recording as revenue until conditions are satisfied
Preventing and Detecting Non-cash Thefts That are Concealed by Fraudulent Support (8)
Separate duties of ordering goods, receiving goods, maintaining perpetual inventory records, and issuing payments Match invoices to receiving reports before payments are issued Match packing slip to purchase order to prevent Monitor increases in bad debts expense Reductions to perpetual inventory should be properly supported Reconcile materials ordered for projects to the actual work done Periodically perform trend analysis on inventory designated as scrap Only remove assets with proper authority
Preventing and Detecting Cash Larceny from the Deposit (5)
Separating duties Itemized deposit slip Compare authenticated deposit slip to organization's copy of deposit slip, remittance list, and general ledger posting Deliver 2 copies of bank statement to different people in organization Reconcile bank statements timely
Improper Disclosures: Subsequent events
Should be disclosed. Fraudsters often avoid disclosing court judgments Public record searches often reveal this information
Kickback Schemes
Similar to billing schemes in that there is submission of invoices for goods and services that are either overpriced or fictitious But they really are "asset misappropriations" that involve collusion between someone inside the organization (employee) and someone outside the organization (vendor) Almost always attack purchasing function of the victim company Diverting business to vendors -Directing excess business to a vendor -Ensure steady stream of business -However, vendor is no longer subject to economic pressures, which leads to over-billing (no incentive for best price)
Illegal Gratuities
Similar to bribery schemes -There is not necessarily intent to influence a particular business decision - employees rewarded for decision made -Accepting gift amounts are not allowed in many government and some private company code of ethics Example: City commissioner accepted free international vacation after conclusion of deal
Other Conflicts of Interest Schemes: Business Diversions
Siphon employers clients for own business Steer potential clients away from employer
Difference between skimming & larceny
Skimming not on books, larceny is
One of five methods used in receivables skimming: Stolen Statements
Stolen statements- intercept statement/change customer address information
Preventing and Detecting Cash Larceny at the Point of Sale (4)
Strong internal controls - segregate the cash recipts process with independent checks of receiving and recording cash Segregation of duties - separate the recording of the transaction with the cash count and register tape removal Discrepancies between sales records and cash on hand - most likely fraudster is not going to draw attention to themselves with high dollars but maybe high frequency of differences Periodically generate reports of discounts, returns, adjustments, and other concealing transactions - reviews trends
Economic Extortion
The flip side of a bribery scheme Employee demands payment from a vendor in order to make a decision in that vendor's favor. Got to "play ball" to get the business Most common in bank loans - banker demands payment in order to grant a loan
Bribery
The offering, giving, receiving, or soliciting anything of value to influence an official act Influence an official act means only payments made to influence the decisions of government agents, or employees.
Costs of Financial Statement Fraud (12)
Undermines the reliability, quality, transparency, and integrity of the financial reporting process Jeopardizes the integrity and objectivity of the auditing profession Diminishes the confidence of the capital markets in reliability of financial information Makes the capital markets less efficient Adversely affects the nation's economic growth and prosperity Results in huge litigation costs Destroys careers of individuals involved in financial statement fraud Causes bankruptcy or substantial economic losses by the company engaged in financial statement fraud Encourages regulatory intervention Causes devastation in the normal operations and performance of alleged companies Raises serious doubt about the efficacy of financial statement audits Erodes public confidence and trust in the accounting and auditing profession
Conflicts of Interest Schemes
Undisclosed economic or personal interest in a transaction that adversely affects the company Employee must have employment interest in the vendor that submits the invoice
Conservatism Constraint
When in doubt regarding accuracy, avoid overstatement of assets and income (e.g., LCM)
Write-off inventory/Other Assets Scheme & Result
Write off inventory as "obsolete" Result: Remove assets from the books before or after they are stolen - no shortage
FASB 5 requires
accrual of losses on uncollectable receivables
Methods of Falsifying Invoices: Pass-Through Schemes
actual goods and services purchased and "passed through" perpetrator
Falsifying incoming shipments
alter receiving report sent to Accounts Payable or cause short pay through "tolerances"
Methods of Falsifying Invoices: Reliance on False Documents
creating invoices that will appear real enough to be processed normally
Goodwill is
excess of purchase price over value of assets
Cash larceny from deposit
is the taking money prior to depositing it
Skimming by off-site employees
low level of supervision - rental payments on apartments shown as vacant, unpredictable collections (e.g., security deposits, parking lot fees), insurance policies
A.R. should be reported as
net realizable value
Purchasing and receiving functions are used to facilitate theft of
noncash assets
Just ____ a ____ can constitute as a bribe
offering a payment
Record revenue in December and expense in January to __________ at year end
overstate net income
Large percentage of cash larceny schemes occur at
point of sale because that's where the money is
FASB 142 and 144 require the
recording of impairment of long-lived assets and goodwill
Methods of Falsifying Invoices: Purchases of Services Rather than Goods
services not inventoried and are varied in activity
Deposit lapping
steal current deposit and replace it with tomorrow's deposit
Death by a thousand cuts
take small amounts regularly and fraud may be chalked up to errors instead of theft
Overstate income in current period, ______ income in subsequent periods
understate
"Rubber Stamp" Supervisors
utilizing incompetence or inattention of supervisors to approve false documents