Other forms of this type of fraud are posting sales before they are made or prior to payment, reinvoicing past due accounts and prebilling for future sales. This one involves understating revenue in one accounting period by creating a reserve that can be claimed in future, less robust periods. Famously, this is what Wells Fargo did in a fraud that came to light in 2016: To meet impossible sales goals, employees created millions of checking and savings accounts on behalf of clients - but without their consent. Perpetrators of this kind of fraud may reverse the false sales at the end of the reporting period to help conceal the deceit. Fictitious revenue involves claiming the sale of goods or services that did not occur, such as double-counting sales, creating phantom customers or overstating or otherwise altering the legitimate invoices of existing customers. If the company overstates its revenue, it creates a false picture of fiscal health that may inflate its share price. This can be done by prematurely recording future expected sales or uncertain sales. A company can commit fraud by claiming money as received before the goods or services have been delivered. Wrongdoers manipulate revenue, expenses, liabilities and assets to portray the company in a more positive light. When it comes to financial statement fraud, most cases involve intentionally misrepresenting accounting so that share prices, financial data or other valuation methods make a company seem more profitable. This can be automated through an enterprise resource planning (ERP) system.īusiness fraud comes in many forms, including bribery, kickbacks and payroll fraud. 1 way to prevent financial statement fraud is to have in place a system of strong internal controls that enforce the segregation of duties so that no single employee has authorization to view and alter all financial data.
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