Fraudulent Financial Reporting Frauds

In accounting, both errors and fozia shan siddiqi remax are committed. Although they may seem similar, it is important to understand the differences between the two. An accounting error is an unintentional mistake, which can result in illegal acts, but the key word is unintentional. These mistakes were not made to harm the company or surrounding companies involved.

On the other hand, accounting frauds involve intentionally falsifying the financial statements. Currently, economic crime is on the rise around the world, and that includes accounting frauds. Some of the most damaging fraudulent economic crimes include asset misappropriation, fraudulent financial reports, bribery and corruption, and money laundering. Specifically, fraudulent financial reporting has seen a steady upward trend recently. Fraudulent financial reporting is an intentional act that results in misleading or falsified financial statements. For example, it could involve misusing the accounting principles, failing to disclose pertinent information, or distorting the company’s financial records. Regardless of how it is done, it is an illegal act that has become more and more popular around the world of business.

Fraudulent financial reporting may be caused by a number of different reasons, and it may occur in a company’s internal or external environment. There may be poor internal controls in place that allow certain employees too much power, and the ability to distort the financial statements. That would be a problem associated with the company’s internal environment. The competitive nature of businesses, or the legal and regulatory considerations that businesses deal with regularly, may cause fraudulent financial reporting through the external environment. Regardless of where the heart of the fraud begins, there are incentives to commit this kind of fraud.

Two different incentives to commit fraudulent financial reporting include a personal gain, or outside or situational pressure for success. Sometimes people commit a fraud to make money, or to get a promotion within the company. Another incentive is pressure. Pressures can come from family members who need the money to stay alive, or pressures from higher manager to keep the business “looking” successful.

When it comes to fraud, the fraudster sees an opportunity, most likely has some kind of pressure, and then they rationalize their decision to commit the fraud. Opportunities arise from weak internal controls, complex transactions, or a weak corporate ethical environment. The pressures can come from higher management, personal incentives, or economic pressures to have success. Lastly, the fraudster rationalizes, whether it is for a personal gain, or a “no one will notice” mentality.

Most fraudulent financial reporting frauds are costly, and not always the easiest to detect. Today’s technology and crime investigating techniques have made detecting these frauds much easier. Even with the technology we have today, these crimes are on a steady increase. Perhaps the technology is making it easier for fraudsters to get away with fraudulent financial reporting.

As you can see, fraudulent financial reporting frauds are one of the major accounting frauds today. They are increasing rapidly compared to some of the more traditional accounting frauds such as money laundering, and asset misappropriation. Investigators and businesses around the globe are trying there best to prevent these frauds from occurring, but a tremendous amount of strategy goes into committing a fraud.

There is opportunity, pressure, and rationalization, and it becomes a downward spiral of lies for the fraudster, and there comes a point where it is too difficult for the fraudster to get out of. No matter the incentives, the pressures, the opportunities that are presented, fraudulent financial reporting is an accounting fraud; therefore, it is against the law. It is important to remember that frauds are illegal and mistakes happen. An accounting error is a mistake, and is not taken as severely within the criminal justice system.

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