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Financial Statement Fraud: Ficitious Revenues and Other Forms

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Fictitious revenues
Timing Differences
Concealed Liabilities & Expenses

Compose an outline of the evidence gathering plan you would use for each of the financial statement fraud schemes researched that includes, among others, a goal, financial analysis, documentation, information to obtain or verify and procedure for obtaining each, investigation resources, and interviews sections.

* Step-by-step plan to gather evidence
* For each step in the plan, there should be 3 subsections(one for each of the 3 fraud schemes researched)
* A summary of each subsection in the plan, and explain how it may be useful.

The three financial statement fraud schemes on top are the ones the research is on.

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Financial statement fraud

1. Fictitious revenues
a. Goal - To assess whether the revenue figures reported in the financial statements has been overstated
b. Financial Analysis
i. Days sales outstanding - if revenues have been overstated, DSO usually shows unusual level
ii. Comparison of accounts receivable growth to sales trend - this financial analysis allows the auditor to check the growth trends of two highly correlated accounts. Growth in sales usually results in the same level of growth in accounts receivable. If receivables grew much less than the increase in sales, additional tests are warranted
c. Step-by-step plan
i. Step 1 - Increase cash receipts cut-off tests. This procedure tests whether management has deliberately kept their cash receipts journal open beyond the end of their fiscal year. ...

Solution Summary

This solution provides a detailed discussion of three financial statement fraud schemes.