REVENUE-BASED SCHEMES

  • Introduction to Revenue-Based Financial Reporting Fraud Schemes
  • Revenue Recognition Principles
  • Changes Proposed by FASB and IASB
  • Overview of Revenue-Based Schemes

Timing Schemes

  • Alteration of Records
  • Shipping Schemes
  • Percentage of Completion Schemes
  • Improper Estimates of Revenue Recognition Period
  • Multiple-Element Revenue Recognition Schemes
  • Customer Loyalty Programs
  • Channel Stuffing
  • Bill and Hold Schemes
  • •Sales with Right of Return
  • •Improper Pushing of Current Revenue to Future Periods
  • •Use of Reserves as a Rainy Day Fund

Fictitious and Inflated Revenue

  • Fictitious Revenue Schemes
  • Sales to Related Parties
  • Inflated Revenue Schemes
  • Consignment or Financing Arrangements
  • Misclassification Schemes
  • Recording Financing Arrangements as Revenue
  • One-Time Credits Reported as Revenue
  • Sales Incentive Schemes

Gross-Up Schemes

  • Agent versus Principal
  • Barter and Round-Trip Transactions
  • Phony Revenue and Expenses

ASSET-BASED SCHEMES

Improper Capitalization of Costs

  • Start-Up Costs
  • Research and Development Costs
  • Property and Equipment
  • Software Development and Acquisition Costs
  • Website Costs
  • Intangible Assets
  • Advertising Costs
  • Other Deferrals and Prepaid Expenses
  • Inventory Capitalization Schemes
  • Inventory Flow Assumptions 

 

Asset Valuation Schemes

  • Fictitious Assets
  • Inventory Valuation Schemes
  • Inflating the Basis of Property and Equipment
  • Inflating the Basis of Assets Acquired in Noncash Transactions
  • Assets Acquired from Related Parties
  • Understating Depreciation and Amortization Expense
  • Investment Property
  • Improper Valuation of Investments—Financial Assets
  • Loans
  • Equity Method Investments
  • Proportionate Consolidation
  • Improper Classification or Amortization of Intangible Assets
  • Impairment Losses—Nonfinancial Assets
  • Investments in Insurance Contracts

Fair Value Accounting

  • Fair Value Considerations
  • Methods of Measuring Fair Value
  • Internal versus Externally Developed Valuations
  • Inputs Used in Measuring Fair Value

 

EXPENSE AND LIABILITY SCHEMES

Shifting Expenses to Future Periods

  • Timing Schemes Involving Liabilities
  • Accounts Payable
  • Compensated Absences
  • Contingent Liabilities
  • Accrued Compensation
  • Improper Use of Liability “Reserves”

Omissions and Underreporting of Liabilities

  • Debt
  • Guarantees
  • Pension Liabilities
  • Conditional Asset Retirement Obligations

OTHER FINANCIAL REPORTING SCHEMES

Consolidations and Business Combinations

  • Fraudulent Reporting Involving Consolidations
  • Business Combinations

Financial Reporting Fraud as a Concealment Tool

  • Financial Statement Fraud to Conceal Asset Misappropriations
  • Financial Statement Fraud to Conceal Illegal Acts
 

Financial Statement Fraud by Not-for-Profit Organizations

  • Inflating the Value of Non-Cash Contributions
  • Improperly Reporting Contributions Raised for Others
  • Netting the Results of Fund-Raising Events
  • Improper Allocation of Costs Associated with Joint Activities
  • Misclassification of Expenses

Disclosure Fraud

  • Categories of Disclosure Fraud
  • Common Disclosure Risks

DETECTION AND INVESTIGATION

Detecting Financial Statement Fraud

  • Motives for Financial Statement Fraud
  • Fraud Risk Indicators
  • Internal Control Indicators

Financial Statement Analysis

  • Use of Analytical Techniques to Detect Fraud
  • Horizontal Analysis
  • Vertical Analysis
  • Budget Variance Analysis 
 

Ratio Analysis

  • Research on Ratio Analysis
  • Use of Operating Ratio Analysis to Detect Financial
  • Statement Fraud
  • Another Useful Measure: Working Capital to Total Assets

Other Detection Procedures

  • Analysis Utilizing Multiple Ratios
  • Ratios Involving Nonfinancial Data
  • Other Information and Disclosures in Financial Statements
  • Understandability of Financial Statement Disclosures
  • Testing of Journal Entries

Fraud or Honest Mistake?

  • The “Smoking Gun”
  • Witnesses
  • Altered Documents
  • There’s No Other Explanation for It

Assessing (or Minimizing) Auditor Liability

  • Litigation against Auditors
  • Concealment from the Auditors
  • Auditing Standards
  • Consideration of the Risks of Material Misstatement
  • Improper or Inadequate Use of Analytical Procedures