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Fraud in Financial Statements

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Fraud in Financial Statements


15 min read
10 take-aways
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What's inside?

Financial statement fraud hurts everyone: shareholders, managers, employees and other stakeholders.

Editorial Rating



  • Applicable


Businesspeople, investors and regulators rely on a company’s package of financial statements as a map of its financial status. Organizations that deliberately present inaccurate portraits of their fiscal position damage everyone involved. Experts Julie E. Margret and Geoffrey Peck offer a comprehensive analysis of fraud in financial statements. They explore a broad range of areas, including the influence of organizational culture on the incidence of fraud. They also present comprehensive case studies that explain how managers and executives perpetrate deceptive practices. The authors pack a great degree of detail into this compact report, written for the involved professional, not the casual reader. getAbstract recommends their expertise to executives responsible for governance, compliance and reporting, and to financial analysts and journalists.


Misrepresenting Facts

A finding that a company has issued fraudulent financial statements carries serious legal penalties. Many organizations fail when their frauds come to light, usually after they issue accounts that falsely show they’re functioning normally. Financial statements should accurately reflect a firm’s actual position. A business that misrepresents or distorts facts damages everyone associated with it. Fraud – the act of stealing money or hiding or disguising financial information – occurs frequently. “Financial statement fraud” (FSF) is a specific type of deception involving misrepresenting financial information. Senior managers are the ones who decide how to present their company’s accounts. They engage in fraud if they omit or falsely portray vital information. Managers who commit fraud often are trying to mislead investors and lenders. Those involved in FSF may have something to gain from painting a picture of an enterprise as thriving and healthy when in fact the business is facing a serious challenge.

Falsifying Information

Expert Donald Cressey explains the components of a “fraud triangle”: Individuals perpetrate fraud because of various...

About the Authors

Author of Solvency in Financial Accounting, Julie E. Margret is a senior lecturer in the Department of Accounting at La Trobe University, Australia. Risk management specialist Geoffrey Peck works with Deloitte’s forensic group in Melbourne, Australia.

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