Accounting fraud
Accounting fraud
Accounting fraud is an intentional act involving the use of deception, which occurs for the purpose of distorting financial information and gaining an unfair or illegal advantage and which is carried out by one or more persons in management, those responsible for the governance of the entity, employees or third parties[1].
American Institute of Certified Public Accountants tells us that tax fraud can be carried out in the following ways [2]:
- Tampering with, falsifying or altering the accounting records or supporting documents from which the financial statements are prepared.
- Intentional misstatement or omission in the financial statements.
- Intentional misapplication of accounting principles related to the amounts, classification, presentation, presentation, disclosure, presentation and disclosure of financial statements. amounts, classification, form of presentation, or disclosure.
Economic crimes
Accounting fraud is part of a variety of crimes, which in their totality are part of what are called economic crimes. Among them are corruption, fraud, cybercrime... Economic crimes are a huge and constantly growing problem that society is facing on a daily basis, and they know how to adapt to the times in which we live, making it even more complicated to control them. The globalised world in which we live means that we are constantly exposed to being victims of economic crime. From governments, to multinationals, to small companies and not forgetting individuals, are at risk of suffering economic crime on a daily basis. A clear example of the above is in the words of Steven L. Skalak, a Partner in Advisory Services at Forensic Services in New York, and in his research, he states that “more than half of global chief executives, polled in our just-released 2014 Global CEO Survey, told us they are concerned or extremely concerned about bribery and corruption” [3]. And if we ask ourselves how important accounting fraud is within economic crime, in the words of Sahle and Othman, accounting fraud accounts for 22% of the economic crimes that occur worldwide[4].
Negative impacts
The act of fraud entails many more risks than benefits for those who employ it, because if it comes to light, the consequences are very harsh. Focusing on companies, mismanagement on the part of management can lead to damage to the company's image, causing it to lose its reputation and consequently diminishing the value of the company. Regarding the quantitative aspect of this global, social and economic problem, in 2018 data came to light from the ACFE (Association of Certified Fraud Examiners), which showed that "organisations lose 5% of their annual revenue due to fraud" and if we were to count it "it would be equivalent to 4 trillion dollars of the Gross World Product"[5].
Fraud triangle
The fraud triangle is one of the oldest methods of fraud investigation and today covers 10% of all investigations. In terms of use, the Fraud Triangle method is ahead of the Fraud Triangle method in investigations that analyse aspects of the business organisation and the auditor's side of the business[6].
Footnotes
References
- IFAC (2016). Handbook of International Quality Control, Audit, Review, Other Assurance Engagements, and Related Services Pronouncements. International Federation of Accountants. Edition 2013 (Vol. I).
- AICPA (2002). Statement on Auditing Standards (SAS) No. 99: Consideration of Fraud in a Financial Statement Audit. AICPA.
- Economic Crime: A Threat to Business Globally (2014). PwC.
- ACFE (2018). Report to the Nations; Association of Certified Fraud Examiners: Austin, TX, USA.
- Salleh, S.M. & Othman, R. (2016). Board of Director’s Attributes as Deterrence to Corporate Fraud. Procedia Econ. Financ.(35)
- Ramos Montesdeoca, M., Sánchez Medina, A. J., & Blázquez Santana, F. (2019). [https:///C:/Users/Propietario/Downloads/sustainability-11-01570%20(1).pdf Research topics in accounting fraud in the 21st century: A state of the art. Sustainability, 11(6), 1570.
