What are ccounting anomalies, homework help

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Be sure that each question gives detailed explanation and ample examples

  • List 6–8 types of accounting anomalies.
  • Describe each anomaly and list the kind of information needed to identify each.
  • Provide a minimum of 3 examples to support your statement and findings.

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Running Head: ACCOUNTING ANOMALIES

Types of Accounting Anomalies
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1

Running Head: ACCOUNTING ANOMALIES

Contents
Introduction ..................................................................................................................................... 3
Types of anomalies ......................................................................................................................... 3
1. Improper Revenue Recognition ........................................................................................... 4
2. Overstatement of Expenses or Payables .............................................................................. 5
3. Improper Capitalization of Assets ....................................................................................... 5
4. Income Manipulation ........................................................................................................... 5
5. Valuation Issues ................................................................................................................... 5
6. Disclosures ........................................................................................................................... 6
7. Related Party Transactions .................................................................................................. 6
8. Improper Segment Reporting ............................................................................................... 7
9. Internal Control Deficiencies ............................................................................................... 8
10.

Time Differentiation ......................................................................................................... 9

2

Running Head: ACCOUNTING ANOMALIES

Types of Accounting Anomalies

Introduction
According to the University of Idaho (n.d.) accounting anomalies involve intentional
misstatement and omission of information that is of the essence to financial records and
statements. In the recent years, following the US government’s continued push to fight
corruption and enforce the US Foreign Corrupt Practices Act (FIPA). There has also been a
resurgence of regulatory interest in matters concerning accounting frauds and irregularities.
These acts render financial statements fraudulent as they are misleading due to misappropriation
of assets, checks, cash and other property with aim of theft or embezzlement of property or
covering up these acts. In the case of accounting irregularities concerning Related Party
Transactions, for example, RPTs used to expropriate shareholder’ wealth are covered up by
accounting irregularities.

Types of anomalies
These anomalies may happen through manipulation, alteration or falsification of accounting
records or supporting documents from which financial statements are prepared;
3

Running Head: ACCOUNTING ANOMALIES
Misrepresentation or intentional omission of events, transactions, or other significant
information; Intentional misapplication of accounting principles relating to amounts,
classification, manner of presentation, or disclosure. These anomalies often lead to huge losses
for the company, mismanagement of company resources, misappropriation of funds and
corruption within the company and in relation to their clients. In order to prevent these from
happening, one must first know the different ways in which financial statements can be
manipulated before trusting these statements. The types of anomalies applicable to accounting
statements are mentioned below:
1. Improper Revenue Recognition
This is one of the several ways through which manipulation of revenue in financial
statements is done. Premature recognition of sales (Systems
Network Corp. recognized revenue in 1996, which should have properly been reported in
1997), shipment manipulations (Structural Dynamics Research Corp. found that certain
shipments intended for sale to, or through, third party distribution channels, apparently did
not represent valid sales), inappropriate recognition of gains on derivatives transactions
(Safety Kleen Corp.), improper recording of receivables and recording previously
unrecognized expenses (Park Electrochemical Corp.), and inappropriately recorded revenues
(Allscripts Inc.), sales (McKesson HBOC Inc.), and transactions (JDN Realty Corp.) are all
factors that are involved with the aim of improperly recording of revenue in financial
records.

4

Running Head: ACCOUNTING ANOMALIES
2. Overstatement of Expenses or Payables
This is a method that is used to inflate earnings. Examples of such accounting irregularities
include artificially induced expenses (such as in the case of Rent Way Inc.), inappropriate
recording of expenses (such as in the case of Chicago & North Western Holdings),
understating accounts payable...


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