E-learning series

1. Financial Statement Frauds in India E-learning series

2. Defining frauds in India

3. Objectives of this training • The stated goals of this training program on the early warning signals of financial statements frauds are to • Examine the assumptions of the research on early warning signals of the corporate frauds • Determine what kind of organizations are victims of the various corporate fraud schemes • Prepare a matrix of the frauds where industry vis-à-vis fraud schemes can be highlighted • Identify the most common early warning signals • Definition of Frauds • A material false statement • Knowledge that the statement was false when it was spoken • Reliance on the false statement by the victim • Damages resulting from the victim’s reliance on the false statement • Sections of Slides Background

4. Targeting the Business • Defining Frauds • Frauds committed against the business – The frauds schemes such as embezzlement of the cash, shop lifting and the fraudulent disbursement through payroll are some of the examples of the frauds committed against the companies by the employees. Additionally there are frauds committed by the outsiders where the fake claims on Insurance companies, borrower offering the fake security for obtaining the loans are some of the frauds committed by the outsiders against the organization. • Comitted by the Business • Frauds committed for the business - Financial statement manipulation is one of the biggest sources of committing the frauds for the business. Some of the other frauds committed for the business are the schemes of avoiding the taxes for the organization, declaring the dividends for improving the share prices etc. Types of Frauds • A material false statement • Knowledge that the statement was false when it was spoken • Reliance on the false statement by the victim • Damages resulting from the victim’s reliance on the false statement

5. Output of the Study • This study derives the Matrix based on the 11 Industrial Sectors and 6 fraud schemes of Frauds in the financial statements of Indian Businesses • Financial Statement Fraud Schemes Business Summary

7. Elaboration of fraud matrix • This effort has been made to find out which industry is affected the most because of the above mentioned schemes and what are the most significant early warning signals of the corporate frauds. • One of the objectives of this study was to prepare the Industry-Fraud Matrix which will identify the fraud risks for various industries. For the limited purpose of the study we identified 8 absolute fraud schemes including the two sub-schemes of cash and inventory frauds. The focus of these schemes was the balancesheet items primarily. • Reasons for choosing these items were simple. The survey participants were all the auditors and they are required to certify the balance sheet. They should be aware about the fraud risks while going for the audits of the specific industrial units. • Use of inventory as a tool of manipulating the financial statement was the clear verdict of auditors with more than 60% of the auditors accepting that Manufacturing sector is worst hit by the frauds in the financial statements where inventory is a key element. Industry fraud matrix

8. Targeting the Business • Market Risk • Frauds committed against the business – The frauds schemes such as embezzlement of the cash, shop lifting and the fraudulent disbursement through payroll are some of the examples of the frauds committed against the companies by the employees. Additionally there are frauds committed by the outsiders where the fake claims on Insurance companies, borrower offering the fake security for obtaining the loans are some of the frauds committed by the outsiders against the organization. • Comitted by the Business • Frauds committed for the business - Financial statement manipulation is one of the biggest sources of committing the frauds for the business. Some of the other frauds committed for the business are the schemes of avoiding the taxes for the organization, declaring the dividends for improving the share prices etc. Types of Frauds

9. About the Template Pitchbooks are structured presentations with tightly packed text and graphics. They are usually intended for print rather than projection. Some typical characteristics of a pitchbook presentation include: • Smaller text sizes and more dense content layouts to enable communication of large amounts of information • Simple graphical elements which print quickly and accurately • High degree of consistency between slides and among sections of slides • To start creating slides using this template, click the Home tab and then click to dropdown New Slide gallery. Using the Template

10. About the Template Pitchbooks are structured presentations with tightly packed text and graphics. They are usually intended for print rather than projection. Some typical characteristics of a pitchbook presentation include: • Smaller text sizes and more dense content layouts to enable communication of large amounts of information • Simple graphical elements which print quickly and accurately • High degree of consistency between slides and among sections of slides • To start creating slides using this template, click the Home tab and then click to dropdown New Slide gallery. Using the Template