Forensic accounting and fraud detection

Identify how generally accepted accounting principles and good accounting practices relate to fraud, examine inappropriate account classification, and distinguish management fraud from employee fraud.

Identify skimming as a white-collar crime that takes cash before it enters the accounting system, leaving no audit trail and is sometimes called defalcation, with ATM and card skimming examples.

Channel stuffing, or US trade loading, pushes extra products into distribution channels to meet short-term sales targets, clogging retailers, inflating receivables, and later causing returns and lower sales.

Explore teeming and lading, a bookkeeping fraud also called lapping, where one customer's payment is allocated to another to hide a shortfall, rotating accounts to conceal funds.

Explore how fraudsters use shell companies, fictitious bills, and collusion to misappropriate funds, including overbilling, false credit refunds and kickbacks, payroll manipulation, and related party transactions with arm's length concerns.

Identify fraudulent financial reporting and misappropriation of assets as main causes of misstatements, driven by incentive, pressure, opportunity, and rationalization among management and employees.

Explore how fraudulent financial reporting occurs when management overrides internal controls through fictitious journal entries, altered judgments, concealed facts, and complex transactions, plus misappropriation of assets or cash.

Identify asset misappropriation as the most common form of occupational fraud, followed by corruption and financial statement fraud, with financial statement fraud costing the most and private companies being affected.

Identify techniques of premature or contagious revenue recognition, including liberal return policies, side agreements, channel stop, early delivery, round-tripping, and revenue on disputed claims or consignment sales.

Revenue timing shows how manipulating recognition dates, bill-and-hold, consignment-like arrangements, and premature revenue can inflate growth and risk fraud exposure and stock impact.

Identify fictitious revenue recognition that inflates earnings by recording bogus receivables and lapping collections, transferring balances to substitute customers via non-cash journal entries.

Assess revenue recognition by reviewing policies and customer contracts, including written sale agreements; evaluate practice reasonableness and timing at quarter and year-end, using purchase orders, shipping documents, and payment records.

Improperly deferring earned revenue depresses current profits by recording revenue in a future period, a fraud involving premature or fictitious revenue, open books after period end, or shipping before sale.

Analyze timing difference and cut-off fraud in revenue and expenses, identify indicators like rising sales, unsupported revenue, reduced cost of sales, and use ratios to detect overstated income.

Identify indicators of asset overstatement and liability understatement, such as fictitious assets, unrecorded liabilities, intercompany expenses, and financing contingencies, using current ratio as a red flag.

Explore improper disclosures and inventory valuation fraud, detailing misrepresentation, omissions, and after-balance-sheet events, plus indicators and detection steps like physical inventory verification.

Forensic accounting explores inflating inventory value to secure financing from banks using inventory as security, via false journal entries and improper capitalization, and highlights red flags and investigative steps.

Identify how inventory misappropriation occurs through physical removal, false write-offs, and false sales, and learn controls, including order authorization, independent verification, and regular counts, to prevent inventory fraud.

Identify red flags in investments to prevent asset overstatement, misclassification, and delayed loss recognition; verify existence, classify as current or long-term, and review board minutes and internal controls.

Detect overstated or fictitious receivables by monitoring current ratio, quick ratio, days sales outstanding, and credit-to-cash sales; interview finance, sales, and related parties to assess net realizable value.

Learn how software development costs are expensed before technological feasibility and capitalized after, with guidance on research and development, development phase assets, intangible assets, and startup cost treatment.

Explore common fraud types in forensic accounting, including misappropriation of assets, falsification of records, misstatement of sales, window dressing, and concealment schemes that benefit managers or employees.

Explore auditors' responsibilities for fraud in financial statement audits, including material misstatement and misappropriation of assets, and identify key risk factors: incentive, opportunity, and rationalization.