Page 5 - How Not To Cook The Books Article
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Diagram 1
Against this background the fraud at Wrekin Construction, can be seen
to be a financial statement fraud. This differs from other types of fraud in
that the individuals who commit the fraud generally are not the direct
beneficiaries. However, members of management may benefit directly
from the fraud by keeping their jobs, selling stock, receiving performance
bonuses, or using the false report to conceal another fraud.
Financial statement fraud, involves the intentional misstatement or
omission of material information from the organization’s financial reports;
essentially by overstating assets or revenue or understating liabilities
and expenses.
As indicated in diagram 2, the lion’s share of over 30% of financial
statement fraud is perpetrated by executives and upper management.
