Financial statements have been the basis of making sound
business decisions and a source document of information for the
government and non-government authorities since time immemorial. The
article attempts to bring forth the different modes of carrying out
financial statement frauds. The purpose of the article is to bring to light
and educate upon some of the basic modes adopted for carrying out
the statement frauds.
Financial statements provide the relevant grounds for making a decision. However, what
would it be like when this ground is sunken and cannot be relied upon? It has resulted in a
loss of confidence in the reliability, quality, integrity, credibility and transparency of
financial statements and reports.
Financial statement frauds take place by deliberately manipulating or altering the
financial records or documents, omitting or misrepresenting transactions, misapplying
accounting principles, policies and procedures and non-disclosure or inadequate disclosure regarding
financial transactions and impact thereof.
There are reasons influencing and leading to the manipulation of financial statements. A
few do it in order to get more time to solve business problems, to obtain financing that may not
be provided if correct financial statements are furnished, to obtain loans for their personal gains,
to inflate share prices and sell their shares at profit or to show better earnings of company.
Fraud can also take place to avoid tax liability, to avoid debts, to meet budgets, to achieve high bonus
or to avoid punishment.
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