FRAUD EXAMINATION ALBRECHT, ALBRECHT,

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FRAUD EXAMINATION ALBRECHT, ALBRECHT, ALBRECHT

• Financial Statement Fraud

• CHAPTER 11

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Learning Objectives

1. Understand the role that financial statements
   play in U.S. businesses.
2. Describe the nature of financial statement fraud.
3. Become familiar with financial statement fraud
   statistics
4. See how financial statement frauds occur and are
   concealed.

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Learning Objectives

1. Understand the framework for detecting financial
   statement fraud.
2. Identify financial statement fraud exposures.
3. Explain how information regarding a companys
   management and directors, nature of organization,
   characteristics, relationship with others, and
   financial results can help assess the likelihood
   of financial statement fraud.

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What Are Some Problems with Financial Statements?
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Review the Fraud Triangle.
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What Are the Elements of the Perfect Fraud Storm?
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What Are the Elements of the Perfect Fraud Storm?
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Financial Statement Fraud Statistics.

• Infrequent
• 300 over 10 years
• Costly
• Last 23.7 months
• Mean 25 million
• CEO in 72, CFO, COO
• Computer hardware/software
• 78 of firms on NASDAQ

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Financial Statement Fraud Statistics.

• Most had no audit committee
• Most directors were insiders
• Family relationships between directors
• 56 audited by Big Eight or Big Six
• 25 changed auditors during fraud
• Significant number of class action suits
• Many resignations-few served jail time

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What Are the Motives for Financial Statement
Fraud?
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Discuss Detecting Financial Statement Fraud.
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Complete the Fraud Exposure Rectangle.
Fraud Exposure Rectangle
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2
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Discuss Management Directors.
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Comment On Explain Relationships with Others.
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Describe Questionable Organizations Industries.
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List What to Ask About Organization Industry.
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What Approach is Taken to Examine Financial
Statements?
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What Approach is Taken to Examine Financial
Statements? (contd)
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Define the Acronyms.

1. COSO is
2. SEC is
3. GAAP is

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Match Terms Definitions.
10-K
Quarterly report publicly traded companies file
with SEC

Government Agency responsible for regulating
stock trading financial Statements of Public
companies
10-Q
Annual report publicly traded companies file with
SEC
AAER
Document released by SEC when a company commits
financial statement fraud
SEC
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Match Terms Definitions.
Financial Statement Fraud
It recommended changes in financial statements

Intentionally misstating financial statements
Financial Statements
Reports summarizing cash profits of an
organization
Treadway Commission