Page 21 - Patisserie Valerie Teaching Note
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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.