K
  • Elements_of_financial_statements

    By Monica Hubler, Full-Time Faculty, Kaplan University  
    Published June 2016

    Fraud comes in many forms, including bribery, kickbacks, billing fraud, payroll fraud,and more. Perpetrators plan and commit fraud to benefit themselves, despite the risk of being caught. Most seek personal reward such as a bonus for increased earnings per share through increase of net income, while others may have a plan to ruin the company.  However, when it comes to financial statement fraud, this process will not benefit anyone. It only causes issues with shareholders and potential investors, plus sanctions from the SEC against those committing the fraud.  

    Elements Used for Financial Statement Fraud

    One element of financial statement fraud is fictitious revenue and sales, such as revenues that have not been completed and are not ready to be recognized. This manipulation involves sending products out that were not ordered, but were billed. Another method is a phantom revenue posting, a scheme in which a company will post to revenue items that are under consignment. A company can also manipulate its assets by stating that equipment is leased as an operating lease when it is really a capital lease. 

    Yet another method is misappropriation of postings of transactions or inclusion of false expenses. This is done to hide or mask theft or embezzlement and it is done for purely personal reasons. There are other methods of changing the numbers, such as concealment of liabilities, in which liabilities are kept off the balance sheet, and overstatement of revenue by recording those uncertain sales.

    Financial fraud is also committed by managers of the company to help increase the value of the company. This is a concern with the SEC, which is presently expanding its efforts to prosecute more companies and managers for fraud.

    When a business assembles its financial statements, it wants to project itself in the best light possible and entice investors to review and invest. However, some businesses issue fraudulent financial statements that mislead investors. The SEC has stepped up their reaction to these fraudulent statements and the companies who commit fraud. Does anyone remember Enron?

    References:

    Herrfeldt, B. (2014) What Is Financial Statement Fraud? Retrieved from http://www.ehow.com/about_5061193_financial-statement-fraud.html?ref=Track2&utm_source=ask

    Wolfe, M. (2014) Types of Financial Statement Fraud. Retrieved from http://www.ehow.com/list_7396545_types-financial-statement-fraud.html 

    Monica Hubler, is a full-time faculty member at Kaplan University. The views expressed in this article are solely those of the author and do not represent the view of Kaplan University.

    Back to Center for Excellence

  • Accounting - Ethics Thumb

    Keep Your Organization From Going Down the Road to “Ethical Collapse”!

    By Cynthia Waddell, PhD, CPA, CFE

    Article by Faculty
    Jerry Taylor

    Cost of Capital

    By Jerry Taylor

    Article by Faculty
    GeoffreyVanderPal Thumb

    Identity Theft and Privacy

    By Geoffrey Vanderpal

    Article by Faculty
    Fall_Clean_Up

    Fall Clean Up

    By Dr. Denise Schoenherr

    Article by Faculty
    Stanley Self Thumb

    Revised GAAP Treatment for Goodwill

    By Stanley W. Self, CFE

    Article by Faculty
    Career Resources Thumb

    Accounting

    By Rachel Byers, Full-Time Faculty, School of Business

    Accounting firms are taking advantage of some emerging trends.

    Career Advice
    Career Resources Thumb

    Investments and Wealth Management

    Change is the name of the game in wealth management!

    Career Advice
    Career Resources Thumb

    Real Estate

    Most people do not realize there are a variety of jobs in this field.

    Read More
    Career Resources Thumb

    Risk Management and Insurance

    According to the BLS, employment of insurance sales agents is projected to grow.

    Career Advice
    Definitions Thumb

    Accounting

    Access definitions and FAQs related to accounting.

    Read More
    Definitions Thumb

    Investments and Wealth Management

    Access definitions and FAQs related to investments and wealth management.

    Read More
    Definitions Thumb

    Real Estate

    Access definitions and FAQs related to real estate.

    Read More
    Definitions Thumb

    Risk and Insurance

    Access definitions and FAQs related to risk and insurance.

    Read More
    Toby Talks

    Toby Talks: Is Now a Good Time to Start a Real Estate Career?

    Kaplan Real Estate Education's Toby Schifsky looks at the factors to consider when pursuing a real estate career.

    Watch Now
    RE_Tips

    Toby Talks: Do I Need a Business Plan?

    Toby Schifsky talks about the importance of goals and action steps for achieving them.

    Watch Now
    Study Tips

    Tips for Insurance Licensing Exams

    Access preparation and practice advise from Kaplan Financial Education experts Mary Orn and Julie Ramsey.

    Wach Now
    Maylee Testimonial

    Maylee's Success Story

    Maylee talks about her experiences with Kaplan Financial Education and preparing for her exams.

    Wach Now