This discussion primarily pertains to financial statement fraud--that is, financial statements that contain intentionally, or, in some circumstances, recklessly, false statements or entries designed to deceptively enhance the company’s financial picture. Internal accounting controls may not always be sufficient, but they are the first line of defense in preventing and detecting fraud....
Every day, news of financial statement fraud is adversely affecting the economy worldwide. Considering the influence of the loss incurred due to fraud, effective measures and methods should be employed for prevention and detection of financial statement fraud. Data mining methods could possibly assist auditors in prevention and detection of fraud because data mining can use past cases of fraud to build models to identify and detect the risk of fraud and can design new techniques for preventing fraudulent financial reporting....
Closing the Expectation Gap in Deterring and Detecting Financial Statement Fraud: A Roundtable Summary
On April 24, 2013, a roundtable was held on the subject of the “expectation gap.” The objective of this program was to bring together the key players in the financial reporting supply chain (corporate directors, financial executives, external auditors, and internal auditors) to discuss each group’s expectations of the roles of the various players in the deterrence and detection of financial reporting fraud.
On a number of occasions over the past few decades, major public companies have experienced financial reporting fraud, resulting in turmoil in the U.S. capital markets, a loss of shareholder value, and, in some cases, the bankruptcy of the company itself. The Sarbanes-Oxley Act of 2002 has done much to improve corporate governance and deter fraud; however, financial reporting fraud—an intentional, material misrepresentation of a company’s financial statements—remains a serious concern for investors and other capital markets stakeholders.
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