HomeHome SearchSearch MenuMenu Our productsOur products

Three ways to help prevent Financial Statement Fraud in your company

by , 24 May 2013
Financial Statement Fraud (FSF) can cripple your business. When FSF is committed, it's usually by members of senior management or the executives with access to financial information like budgets, expense reports, income statements, trial balances and balance sheet. Here are three tips you can use to identify red flags in your company.

FSF is committed when your company's assets, revenues, and profits are deliberately overstated and liabilities, expenses and losses are deliberately understated in financial statements.

Some companies do this to get out of financial or liquidity problems. But, it's detrimental in the long run because the person who makes these fraudulent recordings can face criminal charges and drag your company down with him.

Prevent this from happening to your company by knowing which red flags point to FSF.

Look at these areas in your company to prevent FSF

The Practical Accountancy Loose Leaf says when you look for fraud, don't just look at the numbers. Look at the bigger picture of the business. Look at your company's:

  1. Management and the Board of Directors. What are their backgrounds? What motivations drive your management? What's their scope of influence? Also keep in mind that 'if management has ulterior motives, there are high chances of fraud,' warns the Loose Leaf.
  2. Your company's relationships with other entities. What kind of relationships does your company have with financial institutions, auditors, lawyers, investors and regulatory bodies? And most importantly, is the relationship disclosed and transparent?
  3. The organisation and its industry. How is your company structured? What are the unique characteristics about your company? How do these characteristics compare to your peers in the industry? When you do an analysis? It's good to compare how you're doing vs the market. If you're on par or slightly higher or lower than industry standard, you know you're in close proximity to the norm. But, if there's a significant difference between your company and its peers, find out why. 'This is particularly important to investors and fraud examiners,' warns the Loose Leaf.

Use these methods to help you prevent financial statement fraud in your company.



Related articles




Related articles



Related Products



Comments
0 comments


Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>