Financial Statement Fraud: Strategies for Detection and Investigation

PART FOUR

Other Financial Reporting Schemes

WHILE THE MAJORIT Y OF FRAUD SCHEMES are triggered by a desire to manipulate assets, revenues, liabilities, or expenses, there are a variety of other schemes, initiated in connection with other types of transactions. Those schemes are the subject of this part. Schemes covered in this part include:

1. Preparation of consolidated financial statements (i.e., improper inclusion or exclusion of other entities from the financial statements)

2. Business combinations (i.e., acquisitions of other companies)

3. Financial statement fraud perpetrated as a method of concealing asset misappropriations

4. Financial statement fraud perpetrated as a means of concealing illegal acts

5. Financial reporting fraud by not-for-profit organizations

6. Disclosure fraud

The third and fourth categories from this list also represent reminders that not all financial reporting frauds are motivated by an attempt to inflate a company's reported profits or financial condition.