Financial Statement Fraud: Prevention and Detection

✍ Scribed by Zabihollah Rezaee, Richard Riley

• Year: 2009
• Tongue: English
• Leaves: 355
• Edition: 2
• Category: Library

✦ Synopsis

Practical examples, sample reports, best practices and recommendations to help you deter, detect, and prevent financial statement fraudFinancial statement fraud (FSF) continues to be a major challenge for organizations worldwide. Financial Statement Fraud: Prevention and Detection, Second Edition is a superior reference providing you with an up-to-date understanding of financial statement fraud, including its deterrence, prevention, and early detection.You will findA clear description of roles and responsibilities of all those involved in corporate governance and the financial reporting process to improve the quality, reliability and transparency of financial information.Sample reports, examples, and documents that promote a real-world understanding of incentives, opportunities, and rationalizationsEmerging corporate governance reforms in the post-SOX era, including provisions of the SOX Act, global regulations and best practices, ethical considerations, and corporate governance principlesPractical examples and real-world "how did this happen" discussions that provide valuable insight for corporate directors and executives, auditors, managers, supervisory personnel and other professionals saddled with anti-fraud responsibilitiesExpert advice from the author of Corporate Governance and Ethics and coauthor of the forthcoming Wiley textbook, White Collar Crime, Fraud Examination and Financial ForensicsFinancial Statement Fraud, Second Edition contains recommendations from the SEC Advisory Committee to reduce the complexity of the financial reporting process and improving the quality of financial reports.

✦ Table of Contents

FINANCIAL STATEMENT FRAUD: Prevention and Detection......Page 3
Contents......Page 7
Foreword......Page 13
Preface......Page 15
Acknowledgments......Page 21
Part I: Financial Reporting and Financial Statement Fraud......Page 23
WILL HISTORY REPEAT ITSELF?......Page 25
DEFINITION OF FINANCIAL STATEMENT FRAUD......Page 26
NATURE OF FINANCIAL STATEMENT FRAUD......Page 30
HIGH-IMPACT FRAUD CASES......Page 33
COST OF FINANCIAL STATEMENT FRAUD......Page 35
FRAUD STUDIES AND REGULATORY RESPONSES......Page 38
ANTIFRAUD PROGRAMS......Page 41
OCCURRENCE, PREVENTION, AND DETECTION......Page 44
LESSONS LEARNED AND APPLICATIONS FOR PRACTICE......Page 47
NOTES......Page 50
FINANCIAL REPORTING SYSTEM......Page 53
IMPORTANCE OF FINANCIAL INFORMATION......Page 55
ANNUAL FINANCIAL REPORTING REQUIREMENTS......Page 60
HIGH-QUALITY FINANCIAL REPORTS......Page 61
SIX-LEGGED STOOL OF THE FINANCIAL REPORTING PROCESS......Page 63
CORPORATE FINANCIAL REPORTS......Page 64
CORPORATE REPORTING CHALLENGES......Page 66
FINANCIAL RESTATEMENTS......Page 67
STOCK OPTIONS ACCOUNTING......Page 68
XBRL-GENERATED FINANCIAL REPORTS......Page 69
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 70
NOTES......Page 74
Part II: Financial Statement Fraud Profile, Taxonomy, and Schemes......Page 77
WHY DOES FINANCIAL STATEMENT FRAUD OCCUR?......Page 79
PROFILE OF FINANCIAL STATEMENT FRAUD......Page 80
WASTE MANAGEMENT, INC.: FINANCIAL STATEMENT FRAUD ANALYSIS......Page 92
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 94
NOTES......Page 98
REALIZATION......Page 100
THE 3CS MODEL......Page 101
FINANCIAL STATEMENT FRAUD PREVENTION......Page 106
FINANCIAL STATEMENT FRAUD DETECTION......Page 108
PREVENTION, DETECTION, AND CORRECTION STRATEGIES......Page 109
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 111
NOTES......Page 118
SYMPTOMS OF FINANCIAL STATEMENT FRAUD......Page 119
COMMON FRAUD SCHEMES......Page 123
COMMON REVENUE FRAUD SCHEMES......Page 125
FINANCIAL STATEMENT FRAUD RED FLAGS......Page 127
WHISTLE-BLOWER REGULATIONS......Page 134
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 136
NOTES......Page 139
Part III: Corporate Governance and Its Role in Preventing and Detecting Financial Statement Fraud......Page 141
INTRODUCTION......Page 143
ROLE OF CORPORATE GOVERNANCE......Page 144
CORPORATE GOVERNANCE STRUCTURE......Page 147
CHARACTERISTICS OF CORPORATE GOVERNANCE......Page 149
CORPORATE GOVERNANCE FUNCTIONS......Page 150
GLOBAL CORPORATE GOVERNANCE......Page 154
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 156
NOTES......Page 158
ROLE OF THE BOARD OF DIRECTORS......Page 160
COMPOSITION OF THE BOARD OF DIRECTORS......Page 161
FUNCTIONS OF THE BOARD OF DIRECTORS......Page 164
ATTRIBUTES OF BOARDS OF DIRECTORS......Page 167
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 173
PROTOCOL: A PLAN FOR REACTION TO ALLEGATIONS OF MISCONDUCT......Page 174
NOTES......Page 177
AUDIT COMMITTEE......Page 179
AUDIT COMMITTEE ATTRIBUTES......Page 188
AUDIT COMMITTEE ROLES AND RESPONSIBILITIES......Page 190
AUDIT COMMITTEE CHARTERS......Page 194
AUDIT COMMITTEE REPORT......Page 195
AUDIT COMMITTEE ROLES IN PREVENTING AND DETECTING FINANCIAL STATEMENT FRAUD......Page 199
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 200
NOTES......Page 205
MANAGEMENT FINANCIAL REPORTING RESPONSIBILITIES......Page 206
MANAGEMENT’S ROLE IN FINANCIAL STATEMENT FRAUD PREVENTION AND PROTECTION......Page 212
MANAGEMENT MOTIVES AND INCENTIVES......Page 213
MANAGEMENT OVERRIDE OF INTERNAL CONTROL......Page 214
GAMESMANSHIP......Page 216
RISK MANAGEMENT......Page 218
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 222
NOTES......Page 226
INTERNAL AUDITORS AND CORPORATE GOVERNANCE......Page 228
INTERNAL AUDITORS’ RESPONSIBILITIES......Page 230
INTERNAL AUDIT FRAUD STANDARDS......Page 234
EFFICACY OF INTERNAL AUDIT IN FINANCIAL STATEMENT FRAUD PREVENTION AND DETECTION......Page 236
COOPERATION BETWEEN EXTERNAL AND INTERNAL AUDIT......Page 237
INTERNAL AUDITS AND THE AUDIT COMMITTEE......Page 239
INTERNAL CONTROL......Page 240
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 247
NOTES......Page 249
INDEPENDENT AUDIT OF FINANCIAL STATEMENTS......Page 251
INDEPENDENT AUDITOR AND FINANCIAL STATEMENT FRAUD......Page 256
INDEPENDENT AUDIT AND INTERNAL CONTROL......Page 259
REPORT ON INTERNAL CONTROLS......Page 260
FRAUD DETECTION AUDIT PROCEDURES......Page 262
MATERIALITY GUIDANCE......Page 268
RISK FACTORS OF FINANCIAL STATEMENT FRAUD......Page 271
COMMUNICATION OF FRAUD......Page 275
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 276
NOTES......Page 278
INTRODUCTION......Page 280
ROLE OF REGULATION IN CORPORATE GOVERNANCE......Page 281
SARBANES-OXLEY ACT OF 2002......Page 282
SECURITIES AND EXCHANGE COMMISSION......Page 285
SEC’s REGULATION FAIR DISCLOSURE......Page 289
PRIVATE SECURITIES REFORM ACT OF 1995......Page 290
SEC FRAUD PREVENTION ACTIVITIES......Page 291
SEC FRAUD ENFORCEMENT ACTIVITIES......Page 292
ROLE OF THE FINANCIAL ACCOUNTING STANDARDS BOARD......Page 295
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 298
NOTES......Page 301
Part IV: Digital (Computer) Approaches to Fraud and Forensic Accounting......Page 303
INTRODUCTION......Page 305
DIGITAL ECONOMY......Page 306
ELECTRONIC COMMERCE......Page 307
CHANGES IN BUSINESS ENVIRONMENT......Page 310
ELECTRONIC FINANCIAL REPORTING......Page 314
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 324
NOTES......Page 327
INTRODUCTION......Page 328
THE INTERRELATIONSHIP: AUDITING, FRAUD EXAMINATION, AND FORENSIC ACCOUNTING......Page 329
FORENSIC ACCOUNTING PRACTICE......Page 330
FRAUD EXAMINATION......Page 332
TRAINING COMPETENT AND ETHICAL FRAUD EXAMINERS AND FORENSIC ACCOUNTANTS......Page 335
FRAUD EXAMINATION AND FORENSIC ACCOUNTING EDUCATION......Page 337
ROLE OF RESEARCH IN A PROFESSION......Page 338
ANTIFRAUD APPLICATIONS FOR PRACTICE......Page 340
NOTES......Page 343
Appendix: Summary of Six Recent Fraud Studies......Page 345
About the Authors......Page 349
Index......Page 351