In this new century, financial statement fraud has increasingly become a serious problem for business, government, and investors. In fact, the issue threatens to undermine the confidence of capital markets and corporate leaders. Auditors, in particular, have been hit hard for their seeming inability to find fraud on a massive scale. Monetary damages and settlement judgments in the hundreds of millions of dollars against auditing firms have become commonplace, and one of the largest auditing firms, Arthur Andersen, has completely disappeared. Now fully updated and filled with up-to-date case…mehr
In this new century, financial statement fraud has increasingly become a serious problem for business, government, and investors. In fact, the issue threatens to undermine the confidence of capital markets and corporate leaders. Auditors, in particular, have been hit hard for their seeming inability to find fraud on a massive scale. Monetary damages and settlement judgments in the hundreds of millions of dollars against auditing firms have become commonplace, and one of the largest auditing firms, Arthur Andersen, has completely disappeared. Now fully updated and filled with up-to-date case examples, Financial Statement Fraud, Second Edition not only explains in understandable language how financial schemes are committed, it also offers valuable advice on how to prevent and detect them. The Second Edition is written specifically with publicly held companies in mind--and packed with guidance from standard-setting organizations such as the PCAOB, AICPA, and the SEC, providing theoretical and practical advice ideally suited for you--whether you are a manager or an auditor--to help you recognize and stop financial statement fraud. The Second Edition continues to focus on the importance of corporate governance in preventing and detecting financial statement fraud, with the latest coverage on: * Examinations of real-world frauds and practical tools and techniques for carrying out their antifraud responsibilities * Initiatives affecting the financial reporting and corporate governance and auditing functions, such as SOX- and SEC-related implementation rules * Recommendations from the SEC Advisory Committee to reduce the complexity of the financial reporting process and improve the quality of financial reports * Emerging financial reporting and auditing initiatives, including movement toward IFRS and IAAS and the use of the XBRL reporting platform * Corporate governance reforms in the post-SOX era, including provisions of the SOX Act, global regulations and best practices, ethical considerations, and corporate governance principles Straightforward and clear, this superior reference provides you with an up-to-date understanding of financial statement fraud, including its deterrence, prevention, and detection. Its uncomplicated language illustrates theoretical and practical concepts and procedures to aid comprehension of complex financial reporting processes and exposure to a variety of fraudulent activities.Hinweis: Dieser Artikel kann nur an eine deutsche Lieferadresse ausgeliefert werden.
ZABIHOLLAH REZAEE, PHD, CPA, CFE, CIA, CGFM, CMA, is the Thompson-Hill Chair of Excellence and Professor of Accountancy at the University of Memphis and served a two-year term on the Standing Advisory Group (SAG) of the Public Company Accounting Oversight Board (PCAOB). He has published over 175 articles in a variety of accounting and business journals and six books, including Corporate Governance and Ethics (Wiley). RICHARD RILEY, PHD, CPA, CFE, is a Louis F. Tanner Distinguished Professor of Public Accounting at West Virginia University. He was recognized as the 2008 ACFE Educator of the Year and by the American Accounting Association in 2009 for his innovations in accounting education. He is a forensic accountant and a Certified Fraud Examiner who has developed and implemented educational programs for the United States National Institute of Justice and the Internal Revenue Service. In addition to his distinguished academic career, he was employed as a senior accountant in the accounting firm of Deloitte & Touche.
Inhaltsangabe
Foreword xi Preface xiii Acknowledgments xix Part One: Financial Reporting and Financial Statement Fraud 1 1 Financial Statement Fraud Defined 3 Will History Repeat Itself? 3 A Closer Look 4 Definition of Financial Statement Fraud 4 Nature of Financial Statement Fraud 8 High-Impact Fraud Cases 11 Cost of Financial Statement Fraud 13 Fraud Studies and Regulatory Responses 16 Antifraud Programs 19 Occurrence, Prevention, and Detection 22 Lessons Learned and Applications for Practice 25 Notes 28 2 Financial Reporting Structure 31 Introduction 31 Financial Reporting System 31 Importance of Financial Information 33 Annual Financial Reporting Requirements 38 High-Quality Financial Reports 39 Six-Legged Stool of the Financial Reporting Process 41 Corporate Financial Reports 42 Corporate Reporting Challenges 44 Financial Restatements 45 Fair Value 46 Stock Options Accounting 46 XBRL-Generated Financial Reports 47 Antifraud Applications for Practice 48 Notes 52 Part Two: Financial Statement Fraud Profile, Taxonomy, and Schemes 55 3 Cooking the Books Equals Fraud 57 Introduction 57 Why Does Financial Statement Fraud Occur? 57 Profile of Financial Statement Fraud 58 Waste Management, Inc.: Financial Statement Fraud Analysis 70 Antifraud Applications for Practice 72 Notes 76 4 Realization, Prevention, and Detection 78 Introduction 78 Realization 78 The 3Cs Model 79 Financial Statement Fraud Prevention 84 Financial Statement Fraud Detection 86 Correction Procedures 87 Prevention, Detection, and Correction Strategies 87 Antifraud Applications for Practice 89 Notes 96 5 Taxonomy and Schemes 97 Introduction 97 Symptoms of Financial Statement Fraud 97 Common Fraud Schemes 101 Common Revenue Fraud Schemes 103 Financial Statement Fraud Red Flags 105 Whistle-blower Regulations 112 Antifraud Applications for Practice 114 Notes 117 Part Three: Corporate Governance and Its Role in Preventing and Detecting Financial Statement Fraud 119 6 Role of Corporate Governance 121 Introduction 121 Definition of Corporate Governance 122 Role of Corporate Governance 122 Corporate Governance Structure 125 Characteristics of Corporate Governance 127 Corporate Governance Functions 128 Global Corporate Governance 132 Antifraud Applications for Practice 134 Notes 136 7 Board of Directors' Oversight Responsibility 138 Introduction 138 Role of the Board of Directors 138 Composition of the Board of Directors 139 Functions of the Board of Directors 142 Attributes of Boards of Directors 145 Antifraud Applications for Practice 151 Protocol: A Plan for Reaction to Allegations of Misconduct 152 Notes 155 8 Audit Committees and Corporate Governance 157 Introduction 157 Audit Committee 157 Audit Committee Attributes 166 Audit Committee Roles and Responsibilities 168 Audit Committee Charters 172 Chairperson of Audit Committees 173 Audit Committee Report 173 Audit Committee Roles in Preventing and Detecting Financial Statement Fraud 177 Antifraud Applications for Practice 178 Notes 183 9 Management Responsibility 184 Introduction 184 Management Financial Reporting Responsibilities 184 Management's Role in Financial Statement Fraud Prevention and Protection 190 Management Motives and Incentives 191 Management Override of Internal Control 192 Gamesmanship 194 Risk Management 196 Antifraud Applications for Practice 200 Notes 204 10 Role of the Internal Auditor 206 Introduction 206 Internal Auditors and Corporate Governance 206 Internal Auditors' Responsibilities 208 Internal Audit Fraud Standards 212 Efficacy of Internal Audit in Financial Statement Fraud Prevention and Detection 214 Cooperation between External and Internal Audit 215 Internal Audits and the Audit Committee 217 Internal Control 218 Antifraud Applications for Practice 225 Notes 227 11 Role of External Auditors 229 Introduction 229 Independent Audit of Financial Statements 229 Independent Auditor and Financial Statement Fraud 234 Independent Audit and Internal Control 237 Report on Internal Controls 238 Fraud Detection Audit Procedures 240 Materiality Guidance 246 Risk Factors of Financial Statement Fraud 249 Communication of Fraud 253 Antifraud Applications for Practice 254 Notes 256 12 Governing Bodies 258 Introduction 258 Role of Regulation in Corporate Governance 259 Sarbanes-Oxley Act of 2002 260 Securities and Exchange Commission 263 SEC's Regulation Fair Disclosure 267 Financial Fraud Detection and Disclosure Act of 1992 268 Private Securities Reform Act of 1995 268 SEC and Financial Statement Fraud 269 SEC Fraud Prevention Activities 269 SEC Fraud Detection Activities 270 SEC Fraud Enforcement Activities 270 Role of the Financial Accounting Standards Board 273 Antifraud Applications for Practice 276 Notes 279 Part Four: Digital (Computer) Approaches to Fraud and Forensic Accounting 281 13 Fraud in a Digital Environment 283 Introduction 283 Digital Economy 284 Electronic Commerce 285 Changes in Business Environment 288 Electronic Financial Reporting 292 Antifraud Applications for Practice 302 Notes 305 14 Fraud Examination Practice, Education, and Research 306 Introduction 306 The Interrelationship: Auditing, Fraud Examination, and Forensic Accounting 307 Forensic Accounting Practice 308 Fraud Examination 310 Certification in Financial Forensics 313 Training Competent and Ethical Fraud Examiners and Forensic Accountants 313 Fraud Examination and Forensic Accounting Education 315 Role of Research in a Profession 316 Antifraud Applications for Practice 318 Notes 321 Appendix: Summary of Six Recent Fraud Studies 323 About the Authors 327 Index 329
Foreword xi Preface xiii Acknowledgments xix Part One: Financial Reporting and Financial Statement Fraud 1 1 Financial Statement Fraud Defined 3 Will History Repeat Itself? 3 A Closer Look 4 Definition of Financial Statement Fraud 4 Nature of Financial Statement Fraud 8 High-Impact Fraud Cases 11 Cost of Financial Statement Fraud 13 Fraud Studies and Regulatory Responses 16 Antifraud Programs 19 Occurrence, Prevention, and Detection 22 Lessons Learned and Applications for Practice 25 Notes 28 2 Financial Reporting Structure 31 Introduction 31 Financial Reporting System 31 Importance of Financial Information 33 Annual Financial Reporting Requirements 38 High-Quality Financial Reports 39 Six-Legged Stool of the Financial Reporting Process 41 Corporate Financial Reports 42 Corporate Reporting Challenges 44 Financial Restatements 45 Fair Value 46 Stock Options Accounting 46 XBRL-Generated Financial Reports 47 Antifraud Applications for Practice 48 Notes 52 Part Two: Financial Statement Fraud Profile, Taxonomy, and Schemes 55 3 Cooking the Books Equals Fraud 57 Introduction 57 Why Does Financial Statement Fraud Occur? 57 Profile of Financial Statement Fraud 58 Waste Management, Inc.: Financial Statement Fraud Analysis 70 Antifraud Applications for Practice 72 Notes 76 4 Realization, Prevention, and Detection 78 Introduction 78 Realization 78 The 3Cs Model 79 Financial Statement Fraud Prevention 84 Financial Statement Fraud Detection 86 Correction Procedures 87 Prevention, Detection, and Correction Strategies 87 Antifraud Applications for Practice 89 Notes 96 5 Taxonomy and Schemes 97 Introduction 97 Symptoms of Financial Statement Fraud 97 Common Fraud Schemes 101 Common Revenue Fraud Schemes 103 Financial Statement Fraud Red Flags 105 Whistle-blower Regulations 112 Antifraud Applications for Practice 114 Notes 117 Part Three: Corporate Governance and Its Role in Preventing and Detecting Financial Statement Fraud 119 6 Role of Corporate Governance 121 Introduction 121 Definition of Corporate Governance 122 Role of Corporate Governance 122 Corporate Governance Structure 125 Characteristics of Corporate Governance 127 Corporate Governance Functions 128 Global Corporate Governance 132 Antifraud Applications for Practice 134 Notes 136 7 Board of Directors' Oversight Responsibility 138 Introduction 138 Role of the Board of Directors 138 Composition of the Board of Directors 139 Functions of the Board of Directors 142 Attributes of Boards of Directors 145 Antifraud Applications for Practice 151 Protocol: A Plan for Reaction to Allegations of Misconduct 152 Notes 155 8 Audit Committees and Corporate Governance 157 Introduction 157 Audit Committee 157 Audit Committee Attributes 166 Audit Committee Roles and Responsibilities 168 Audit Committee Charters 172 Chairperson of Audit Committees 173 Audit Committee Report 173 Audit Committee Roles in Preventing and Detecting Financial Statement Fraud 177 Antifraud Applications for Practice 178 Notes 183 9 Management Responsibility 184 Introduction 184 Management Financial Reporting Responsibilities 184 Management's Role in Financial Statement Fraud Prevention and Protection 190 Management Motives and Incentives 191 Management Override of Internal Control 192 Gamesmanship 194 Risk Management 196 Antifraud Applications for Practice 200 Notes 204 10 Role of the Internal Auditor 206 Introduction 206 Internal Auditors and Corporate Governance 206 Internal Auditors' Responsibilities 208 Internal Audit Fraud Standards 212 Efficacy of Internal Audit in Financial Statement Fraud Prevention and Detection 214 Cooperation between External and Internal Audit 215 Internal Audits and the Audit Committee 217 Internal Control 218 Antifraud Applications for Practice 225 Notes 227 11 Role of External Auditors 229 Introduction 229 Independent Audit of Financial Statements 229 Independent Auditor and Financial Statement Fraud 234 Independent Audit and Internal Control 237 Report on Internal Controls 238 Fraud Detection Audit Procedures 240 Materiality Guidance 246 Risk Factors of Financial Statement Fraud 249 Communication of Fraud 253 Antifraud Applications for Practice 254 Notes 256 12 Governing Bodies 258 Introduction 258 Role of Regulation in Corporate Governance 259 Sarbanes-Oxley Act of 2002 260 Securities and Exchange Commission 263 SEC's Regulation Fair Disclosure 267 Financial Fraud Detection and Disclosure Act of 1992 268 Private Securities Reform Act of 1995 268 SEC and Financial Statement Fraud 269 SEC Fraud Prevention Activities 269 SEC Fraud Detection Activities 270 SEC Fraud Enforcement Activities 270 Role of the Financial Accounting Standards Board 273 Antifraud Applications for Practice 276 Notes 279 Part Four: Digital (Computer) Approaches to Fraud and Forensic Accounting 281 13 Fraud in a Digital Environment 283 Introduction 283 Digital Economy 284 Electronic Commerce 285 Changes in Business Environment 288 Electronic Financial Reporting 292 Antifraud Applications for Practice 302 Notes 305 14 Fraud Examination Practice, Education, and Research 306 Introduction 306 The Interrelationship: Auditing, Fraud Examination, and Forensic Accounting 307 Forensic Accounting Practice 308 Fraud Examination 310 Certification in Financial Forensics 313 Training Competent and Ethical Fraud Examiners and Forensic Accountants 313 Fraud Examination and Forensic Accounting Education 315 Role of Research in a Profession 316 Antifraud Applications for Practice 318 Notes 321 Appendix: Summary of Six Recent Fraud Studies 323 About the Authors 327 Index 329
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