Financial Statements Fraud
Below are the details of the operational risks covered within this selected sub-risk category:
Misstating of revenues or expenses by senior management
Risk Description: -
Senior managers may collude with finance and/or audit team to intentionally misstate revenues or expenses in the financial statements E.g.: -
- Overstating revenues and profits to attract new investments
- Overstating revenues to meet expectations of existing investors
- Overstating expenses to evade taxes
- Understating revenues to evade taxes
- Understating expenses to hide weak performance of a business unit.
Misstating of assets or liabilities by senior management
Risk Description: -
Senior managers may collude with finance and/or audit team to intentionally misstate assets or liabilities in the financial statements. E.g.: -
- Overstating asset value to acquire loan from bank
- Overstating asset value to extract higher value in merger or acquisition situation
- Overstating asset value to meet certain regulatory requirement
- Understating liabilities to attract new investments
- Understating liabilities to extract higher value in merger or acquisition situation