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FRAUD EXAMINATION ALBRECHT, ALBRECHT, & ALBRECHT

FRAUD EXAMINATION ALBRECHT, ALBRECHT, & ALBRECHT. Financial Statement Fraud. CHAPTER 11. Learning Objectives. Understand the role that financial statements play in U.S. businesses. Describe the nature of financial statement fraud. Become familiar with financial statement fraud statistics

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FRAUD EXAMINATION ALBRECHT, ALBRECHT, & ALBRECHT

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  1. FRAUD EXAMINATIONALBRECHT, ALBRECHT, & ALBRECHT Financial Statement Fraud CHAPTER 11

  2. Learning Objectives • Understand the role that financial statements play in U.S. businesses. • Describe the nature of financial statement fraud. • Become familiar with financial statement fraud statistics • See how financial statement frauds occur and are concealed.

  3. Learning Objectives • Understand the framework for detecting financial statement fraud. • Identify financial statement fraud exposures. • Explain how information regarding a company’s management and directors, nature of organization, characteristics, relationship with others, and financial results can help assess the likelihood of financial statement fraud.

  4. What Are Some Problems with Financial Statements?

  5. Review the Fraud Triangle.

  6. What Are the Elements of the Perfect Fraud Storm?

  7. What Are the Elements of the Perfect Fraud Storm?

  8. Financial Statement Fraud Statistics. • Infrequent • 300 over 10 years • Costly • Last 23.7 months • Mean $25 million • CEO in 72%, CFO, COO • Computer hardware/software • 78% of firms on NASDAQ

  9. Financial Statement Fraud Statistics. • Most had no audit committee • Most directors were insiders • Family relationships between directors • 56% audited by Big Eight or Big Six • 25% changed auditors during fraud • Significant number of class action suits • Many resignations-few served jail time

  10. What Are the Motives for Financial Statement Fraud?

  11. Discuss Detecting Financial Statement Fraud.

  12. Complete the Fraud Exposure Rectangle. Fraud Exposure Rectangle 1 2 4 3

  13. Discuss Management & Directors.

  14. Comment On & Explain Relationships with Others.

  15. Describe Questionable Organizations & Industries.

  16. List What to Ask About Organization & Industry.

  17. What Approach is Taken to Examine Financial Statements?

  18. What Approach is Taken to Examine Financial Statements? (cont’d)

  19. Define the Acronyms. • COSO is • SEC is • GAAP is

  20. Match Terms & Definitions. 10-K Quarterly report publicly traded companies file with SEC Government Agency responsible for regulating stock trading & financial Statements of Public companies 10-Q Annual report publicly traded companies file with SEC AAER Document released by SEC when a company commits financial statement fraud SEC

  21. Match Terms & Definitions. Financial Statement Fraud It recommended changes in financial statements Intentionally misstating financial statements Financial Statements Reports summarizing cash & profits of an organization Treadway Commission

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