Financial Statement Fraud Schemes Essay

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Financial Statement Fraud Schemes
Taisha Ransom
ACC-556
September 30, 2013
Kimberly Warren

Financial Statement Fraud Schemes
Financial statement fraud is the “deliberate misstatements or omissions of amounts or disclosures of financial statements to deceive financial statement users, particularly investors and creditors” (Wells, 2011, p. 6). A fraud investigator has been assigned to Apollo Shoes, Inc. to determine what type of fraud schemes are likely to be present in the company. The investigator will make this determination based on the nature of business at the company and any evidence presented.   The following brief will describe evidence the fraud investigator must collect to determine if fraud is present. The briefly will also describe what substantive tests the investigator must perform to analyze the potential schemes.
Potential Fraud Schemes
Financial fraud schemes include falsification, alteration, and manipulation of financial records and supporting documents. Intentional omissions or misrepresentations of events, transactions, accounts, etc. are also financial statement fraud schemes. Other schemes include misapplying accounting principles and policies and deliberately not disclosing certain information to financial statement readers. For each fraud scheme, fraud investigators should pick up on certain red flags. Then the investigator can begin to collect evidence and analyze it. Apollo Shoes, Inc. deals with a large amount of shipping and receiving inventory and sales. Because of the nature of the business, two specific schemes likely to be present at Apollo Shoes, Inc.   are the fictitious revenue scheme and the concealment of liabilities scheme.

Fictitious Revenue Scheme
Fictitious revenue schemes involve recording sales and of goods or services that did not truly occur. “Fictitious sales most often involve fake or phantom customers, but can also involve legitimate customers” (Wells, 2011, p. 7). Certain events, such as unusual...

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