These eroded financial statements are referred to as fraudulent financial reporting which can be defined in broad sense as deliberate misstatements or oversight of monetary values or disclosures in financial statements prepared to mislead financial statement users. Previous cases of fraud have left investors and regulators looking for answers like how can creative accounting be stopped, how it start and who is to blame when its revealed in their companies. Generally, these entire questions seem to be answered by putting liabilities to management for failure to comply with Generally Accepted Accounting Principles (GAAP). Again, failure to detect fraud can be a backlog of independent auditors for failure to apply Generally Accepted Auditing principles (GAAP) accordingly. To counteract these frauds, regulators, corporations and government have instituted various professional ethics and liability laws to reduce such cases.
Fraud detection and procedure
Fraud detection is not necessarily the duty and obligation of the obvious and recognized agents such as investors, SEC and the independent auditors; rather it is the obligation of community which includes the media, industry regulatory actors, and the company employees. According to the research conducted by the (Kuhn & Sutton, 2006) whistleblowers defer in their capacity to detect frauds. Essentially, the researches indicate that, under legal duties and obligations, the independent auditors and the security regulators are the primary detector agents, auditors can either be internal or external. ...Show more