Generally two types of fraud accountants and financial professionals need to be concerned with

1.Misappropriation of assets

Occurs when employees of a company steal money (or assets) from the company and cover it up

2.Fraudulent financial reporting

Committed by company managers who make false and misleading entries in the records, making financial results of the company appear to be better than they actually are

Go through bullet 1

Examples of misappropriation:  include employee theft of inventory, bribery or kickback schemes in the purchasing function, or employee overstatement of expense reimbursement requests.

Go through bullet 2

Fraudulent financial reporting has the intention to deceive or mislead stakeholders

Qs: With a show of hands – which one do you think is more common? (Misappropriation)

Qs: With a show of hands – which one do you think is more expensive? (fraudulent financial reporting)

Reasons for fraudulent financial reporting:

Deceive investors or creditors by making the financial statements appear better than they are

Increase a company’s stock price or value before selling

Hide company losses or other problems affecting them

Make management appear more successful, potentially driving compensation higher

Qs: Any ideas as to why someone would commit fraudulent financial reporting?

Qs: Any companies you have heard of that have been caught doing this?

Enron, Parmalat, Steinhoff

Go through bullets

Steinhoff (SA Company) details:

https://www.timeslive.co.za/sunday-times/business/2017-12-08-no-way-back-for-steinhoff-as-share-price-plunge-nears-90/