Financial Statement Fraud: Strategies for Detection and Investigation

Preface

ABOUT THIS BOOK

According to the Report to the Nations on Occupational Fraud and Abuse: 2012 Global Fraud Study , prepared and published by the Association of Certified Fraud Examiners (ACFE), financial statement fraud is the least common of the three categories of frauds studied. Asset misappropriations are by far the most common, present in 86.7 percent of the cases studied. Corruption schemes (e.g., bribes, kickbacks, undisclosed confl icts of interest, etc.) represent 33.4 percent of the cases. Only 7.6 percent of the cases are financial statement fraud schemes (the total is more than 100 percent since some cases were classified in more than one category).

This level of frequency has not changed too much over the years. In the ACFE's 2010 study, financial statement fraud was involved in just 4.8 percent of the cases, while in 2008, this statistic was 10.3 percent. However, while it might be the least frequently encountered, financial statement fraud is by far the most costly. In the 2012 report, the ACFE states that the median loss in financial statement fraud cases was $1 million. Median losses in asset misappropriation cases were only $120,000, while the figure rises to $250,000 in cases involving corruption.

Yet the measurement of losses from financial statement fraud is also the most difficult.There is the obvious loss in value of a company when its stock price drops. And there are other measurable losses. But, the indirect losses that result when financial statement ...