Page 6 - How Not To Cook The Books Article

Moreover, over half of financial statement frauds involved overstating
revenues by recording revenues prematurely or fictitiously. About half
the frauds also involved overstating assets by understating allowances

for receivables, overstating the value of inventory, property, plant and
equipment and other tangible assets, and recording assets that did not
exist. (2) Unwin’s position and actions firmly placed him in this category
when he introduced a gem stone, the Gem of Tanzania, into Wrekin
Construction’s accounts (Appendices 2,3).

Diagram 2

According to the Global Fraud Study (GFS (2) (15)) the most commonly
cited method of detecting fraud in cases perpetrated by owners and
executives is the tipoff. The rationale for this is that internal controls tend
to be negated by top-level officials who are uniquely positioned to over-

ride even the best-designed controls.