Page 21 - Patisserie Valerie Teaching Note
P. 21

Patisserie Holdings plc





               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.



               This was the situation that Patisserie Holdings plc found itself in.
               Financial statement fraud differs from other types of fraud in that
               the individuals who commit the fraud generally are not the direct

               beneficiaries. 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.

               The primary responsibility for prevention and detection of

               fraud lies with management and those charged with

               governance. This implies that there must be


                        1. A good control environment

                        2. Risk assessment procedures

                        3. Implementation, operation and monitoring of the IC

                           system (IC System is a third-party collection agency attempting to improve
                           financial outcomes for original creditors and their customers.)





               Although there is no indication in the case study that there

               was a lack of a prevention and detection system in place at
               Patisserie Holdings the sheer scale and severity of the fraud

               (bringing the company down in such a short space of time)

               would tend to support the view that appropriate controls

               were, if not missing then certainly, lacking.
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