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Financial Statement Fraud Motives, Methods, Cases and Detection - Essay Example

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Financial Statement Fraud Motives, Methods, Cases and Detection

19, IFAC, 2010). This paper focuses on the motives behind and the methods used by the fraud perpetrators (i.e., the ones who are responsible for the fraud) to commit financial statement fraud. It also discusses financial statement fraud cases, how these were committed and how these affected the company and the public. Lastly, it also discusses how to prevent and to detect financial statement fraud.
There are many motives behind financial statement fraud. Motives represent the cause that eventually directed the behaviour to commit financial statement fraud and gives us the ‘why’ behind the fraudulent actions (Hasnan, Rahman and Mahenthiran, 2008). There are several motives behind financial statement fraud. These are discussed in the following paragraphs.
One motive is the desire to make the company’s performance look good or look better. The pressure to do this may have come from a desire for the company to obtain more credit; financing or additional capital or the perpetrators want the company to retain or even to increase the value of its stocks (p. 58, Rezaee and Riley, 2010). Another underlying purpose behind this is that the perpetrators want to conceal “deficiencies” in the performance of the company (p. 58, Rezaee and Riley, 2010). Such a pressure may have been created and felt by the perpetrators themselves or were created by other parties (i.e., the stockholders) who are expecting much more than what the perpetrators can actually deliver, hence the need to ‘window – dress’ the company’s financial statements.
Another motive is “to preserve personal status or control” (p. 328, Wells, 2007). This is more on the personal egos of the fraud perpetrators. In financial statement fraud, the perpetrators may be motivated to commit fraud because they are not willing “to admit that their ...Show more
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Despite the tightening of regulations, the continuous improvements in accounting and auditing standards and the increasing watchfulness of the public and regulators alike, financial statement…
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Financial Statement Fraud Motives, Methods, Cases and Detection
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