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Upper management may ask an accountant to overlook certain financial figures from a balance
sheet that may portray the business in a bad light to the public and investors. Omission may not
seem like a significant breach of accounting ethics to an accountant because it does not
encompass direct operation of numbers or records. This is specifically why an accountant must
remain ethically cautious to circumvent falling into such a trap. Accountants need to be educated
on what forms of financial statements frauds can be committed and ways to prevent financial
statement fraud. A strong system of internal controls helps companies deter employees from
committing fraud.
Financial Statement Fraud Categories
Financial statement fraud is deliberate misrepresentation, misstatement or omission of financial
statement data for the purpose of misleading the reader and creating a false impression of an
organization's financial strength (Bradford). Public and private businesses commit financial
statement fraud to secure investor interest or obtain bank approvals for financing, as justification
for bonuses or increased salaries or to meet expectations of shareholders. Financial statement
frauds fall into general categories. These include:
Improper revenue recognition- Systems to manipulate revenue figures typically involve
posting sales before they are made or prior to payment. Examples include recording
