The Association of Certified Fraud Examiners defines financial statement fraud as a deception or fraud committed by certain individuals or entities with prior knowledge that such misrepresentation leads to the creation of unauthorized benefits for those individuals or the entity that performs it. Such matters are when companies change some numbers in the data or financial statements with the aim of making them more profitable than they are in reality, and this type of financial statement fraud is the least common due to its seriousness, but if it is discovered, it will cause a great loss to employers, and thus The perpetrator of this act is subject to a heavy punishment as well, as such operations are based on amending the financial statements in the accounting and financial lists and papers that are sometimes directed to governments, such as modifying stock prices and manipulating data that affects the company’s image, making it appear more profitable.
What are the types of financial statement fraud?
By manipulating financial statements, business owners or managers commit fraud by providing incorrect financial information to official authorities.Usually, the owners of companies that suffer losses manipulate their share prices, making them more profitable or easier to sell. There are many methods and types of fraud in the financial statements. The following are the most important of these types:
Embezzlement
Embezzlement is considered one of the most dangerous forms of financial statement fraud and list fraud. The type of embezzlement is the modification or falsification of financial statements to conceal theft or embezzlement, such as when one of the company’s employees lists fictitious expenses or uses double books, and in this case the embezzlement becomes for personal interests with no effect on the company’s overall perception.
False assessment of assets
The process of evaluating assets in a false way is one of the means of fraud in the financial data and statements, and this method is used to make the assets have a greater value than they are in reality. Sometimes the data in the financial statements may be correct, but the evaluations that led to its inclusion are incorrect.
Exaggerated revenue
This method is one of the simpler methods of financial statement fraud, and its idea is based on the company stating that it has obtained more money or revenue during a certain period than it did at the same time last year, for example, and this method is usually used for the purpose of raising the value of the company in the market if it is sold for a higher price.
Record unconfirmed sales
Some companies record unconfirmed sales or sales that are not treated as actual sales within the financial statements, and this method is closely associated with recording false or exaggerated revenues. This method was also found for the same reasons, as it aims to make the company more profitable or to increase its value in the business market.
Concealment
Concealment is a form of financial statement fraud, in which some obligations or disclosures that harm the company or affect its financial level are kept hidden or kept outside the official statements, such as concealing the financial obligations incurred by the company, such as loans, issuance of debts, etc., which makes the company appear to be in a better financial position than it is in reality.
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