Financial Statement Fraud Case Study

Financial Statement Fraud The auditor will focus on the red alerts that have been cited to point out to the probability that there is a case of fraud in the organization. The auditor will, through the memo, make it clear to the employees that indications of fraud and the steps that will be taken in relation to citing the scam in the instances it occurred. The red flags will be clearly cited in the memo. Through the red flags, the employees will comprehend the shortcomings associated with the company operations. Fraud misrepresentation of figures in financial accounting or management of finances intended at personal gain. Fraud can also be regarded as a misrepresentation of qualities or achievements with the intention of deceiving. It …show more content…
The use of different audit firms for the assessment of the company will indicate fraud. The team will seek to detect the anomalies in the cash flow such as the inability to make cash flows from company processes while giving a report of the growth of the earnings. The audit team will analyze the invoices and cite the liabilities as well as the invoices that are not taken into the financial records of the company. The team will also assess tendencies such as the writing off loans to executives along with any other parties. The team will also focus on the citing the failure by the management to record the liabilities that are warranty-related. The auditing team will look to cite any signs of undisclosed legal unforeseen events. The team will therefore seek to cite any indications of inadequate disclosures. Asset valuation is an important component. Fraudulent inflation of the valuation of assets is way of manipulating profits that is common and is the aspect that the audit team will be looking out for as part of the ways of detecting anomalies. The audit team will seek to establish whether or not the patterns suggesting a relationship between given constituents of the financial report. The audit team will evaluate the changes in the profits that the company generates. The team will look out for the transactions made and reconcile the figures with those given from the …show more content…
Through this, the shortcomings in the management of the finances will be cited to ensure that the possible are minimized. The auditor will also ensure that the top management officials are kept in check to reduce the cases of discrepancies, which are likely to culminate in fraud. The auditors, aside from the efforts to detect the possible cases of fraud will seek to ensure that the operations within the company are correctly channeled to avoid the concealing of financial information. Through this, the auditors will ensure that there is accountability hence have an easy time detecting fraud in the event that it occurs. Auditors are therefore required to feature professional skepticism as it ensures due alertness to the processes at the company hence avoid cases of fraud.

Red Flags of Fraud
The auditor will follow given steps in order to establish whether or not there is a case of fraud in the operations. The auditor will look for the red flags, which are indications in the event that there is a case of fraud within any given organization. The red flags that the auditor will look for are
Managements ' characteristics and influence
• Financial actions that are noticeably aggressive by the management
• Flaws in the characters and personality of the top management officials such as the CEO
• Efforts by management to conceal given financial