What is Fraud

A fraud is an intentional deception made for personal gain or to damage another individual. The most common goal is to gain control of money or other valuable assets. Since fraud can take on many forms, there are quite a few successful variations.

Some examples of criminal fraud include:
Bankruptcy fraud
Identity fraud
counterfeiting
False billing
Long firm (consume credit) fraud
Securities fraud
Accounting fraud

Accounting Fraud
To be specific, accounting fraud is a deliberate manipulation of accounting records in order to make a company's financial performance or condition seem better than it actually is. The usual purpose is to increase the amount that a potential investor will pay or to increase incentive pay to those whose pay depends on a company's performance. Companies looking to commit fraud can be creative in their attempt to manipulate the system. A few examples of accounting fraud include:

Merging short and long term debt into one amount to improve the perceived liquidity of the company.
Failing to disclose risky investments or “creative” accounting practices.
Over-recording sales revenue.
Under-recording expenses (i.e. depreciation expense)

Real Life Examples
There have been, unfortunately, too many examples of accounting fraud in the United States. The U.S. Securities and Exchange Commission, which is responsible for implementing a series of regulatory initiatives required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, has uncovered a number of high profile accounting fraud cases from companies such as:

Xerox – Falsifying financial results for five years, boosting income by $1.5 billion.
Freddie Mac – Understated earnings.
Halliburton – Improper booking of cost overruns.
Lehman Brothers – Failure to disclose an accounting maneuver that resulted in certain short-term loans being reported as sales.

Although these high profile cases directly affected a relatively small percentage of the population, the impact on Wall Street eventually affects Main Street as we have seen in recent years.

Other types of fraud are directed in equal measure at both businesses and individuals. Many fraudsters who target individuals depend on gaining access to documents (checks) or information (account and Social Security numbers) that allow them access to your money.

rhopkins@batescarter.com
770.532.9131

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Fraud Specialists
The professionals at BatesCarter specialize in a number of accounting services including fraud. Preventing fraud is a topic that often discussed at BatesCarter. For more information on fraud or to learn more about BatesCarter as an accounting firm in Gainesville, Georgia, contact us today.

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