Example Of Misappropriation Of Assets

Accounting fraud is defined as the intentional manipulation of financial statements or assets to misrepresent a company’s financial position. Financial fraud can mislead shareholders and investors in numerous ways. Companies have the power to overstate assets or revenue, understate liabilities, or fail to record expenses. These actions can alter a company’s net worth, liquidity, and share price. There are two ways in which a company can commit fraud: misappropriation of assets and misrepresentation of financial statements. Misappropriation of assets arises when an employee steals company assets. These assets could be monetary or physical. On the other hand, an employee misrepresents financial statements when they intentionally report false information. This paper will focus on fraud through falsified financial statements.
b. Misappropriation of Assets
One type of fraud is the misappropriation of assets, otherwise known as insider fraud. This occurs when an employee abuses their position in the company by stealing assets. …show more content…
This included the confirmation of inventories for different subsidiaries. Following this fraud, the American Institute of Certified Public Accountants (AICPA) adopted measures to extend Generally Accepted Accounting Principles (GAAP), specifically in regard to inventories and receivables. These new measures altered the way auditors were selected, expanded the scope of auditors’ work, required a more detailed audit report, and increased the cost of audits. A focus was put on expanding procedures for auditing inventories and accounts receivables. In the summer of 1939, the AICPA appointed its first standing committee on auditing procedures. The first standard, Statement on Auditing Procedure No. 1, “Extensions of Auditing Procedure,” made observing inventory and confirming accounts receivable standard audit