Financial statement frauds which focus on the balance sheet usually involve overstated assets, understated liabilities, or inadequate disclosure of transactions.
From an investor’s perspective, what would be the likely impact of overstating assets or understating liabilities on the value of the investment in the company? Based on your response, do you think investors want fraud investigators brought into the company? What about potential future investors? Why?
As an auditor, what would you be looking for, and what would you do if you found evidence of fraud? What reception would you expect to get for your report?
Among financial statement frauds, Revenue and Inventory accounts are the ones most often used to perpetrate fraud. What is it about these two types of accounts that makes them more prone to fraud?
As a fraud investigator/auditor, you may choose to spend more time on these two types of accounts because they are more prone to fraud? What do you think will be the impact on the fraudster once this becomes known?
How do you distinguish a revenue fraud from legal earnings management?
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