Types & Methods of Fraud
What is the difference between an error and fraud in financial reporting?
what is intentionality
This is the accounting fraud strategy Enron used to hide debt.
What are special purpose entities?
PCAOB stands for this
what is Public Company Accounting Oversight Board
What is off-balance sheet financing
What is when a business’s liabilities are hidden through leases, contracts, or partnerships, thus undermining its liabilities
The total fraud amount discovered at Enron?
What is $74 billion?
The role the PCAOB play in preventing accounting fraud
what is overseeing the audits of public companies to ensure auditors follow standards and to detect or prevent fraudulent financial reporting?
Why is materiality important in determining fraud vs. mistake?
What is small, immaterial errors may be honest mistakes, but large, material misstatements are more likely to be considered fraud
How did WorldCom misclassify operating expenses?
What is recording operating expenses as capital expenses to inflate income?
Most common way fraud is typically discovered in businesses.
what is a whistleblower or tip?
This is when you're reporting revenue on the income statement before the service or product has actually been delivered
What is recognizing revenue before its earned?
What is overstating revenues?
This person uncovered the fraud at WorldCom, and this happened to the CEO
who is Cynthia Cooper and sentenced to 25 years?
two key features of a strong internal control system
What is a Segregation of duties and proper documentation/review processes?
Enron reported future contract values as current revenue, overstating earnings before the profits were realized.
What is Market-to-market accounting?
Two major consequences for both cases
What is job loss, and investors lose money?
(will also take bankruptcy)
The difference in roles between internal and external auditors
What are Internal auditors work within the company to monitor accuracy and efficiency, but they lack independence. External auditors are independent, but are time restrained