Financial statement frauds which focus on the balance sheet usually
involve overstated assets, understated liabilities, or inadequate disclosure of
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?
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
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?