Page 156 - CFF

Methods to commit financial statement fraud — Misstatement

of expenses and liabilities

• Understatement of expense often occurs at the end of an

accounting period

• Three basic approaches to understating expenses

– Failure to record accrued expenses

– Misclassification of expenses as assets

– Undervaluation of expenses
• Liabilities can be overstated when companies establish cookie jar

reserves

• Other methods to commit fraud include off-the-book arrangements

and inappropriate financial presentation

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