What irregularities should a fraud examiner look for in a firm's fixed assets?© BrainMass Inc. brainmass.com June 4, 2020, 1:12 am ad1c9bdddf
Because GAAP allows so many different methods of depreciation and the useful life of assets is subject to varying estimates, there is plenty of opportunity for management mischief. Management can make a firm appear more profitable than it really is by understating depreciation expense.
Depreciation expense can be understated by overstating the useful life of assets. Management can also overstate its assets by keeping obsolete and no longer used assets on its balance sheet. Maintaining obsolete assets ...