Misstatements of Financial Statements: Financial Accounting Fraud (Research Paper Sample)

Misstatements of financial statements as to financial accounting fraud
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Abstract
Misstatements of financial statements (accounting fraud) are deliberate misstatements or omissions of amounts or disclosures in financial statements. As a result, the financial statements do not reflect widely accepted accounting rules in all significant aspects. The topic of the study paper is the auditor's reports to management, which investors view as dishonest, deceptive, confusing, and ambiguous. I've also talked about how the auditor audited the company's management for examples of organizational ethics. As the entity's auditor, the auditor is responsible for presenting credible financial reports to management, which are misrepresented by management and result in serious financial ramifications for stockholders.
Misstatements of financial statements as to financial accounting fraud
Introduction
Misstatements of financial statements are accounting fraud that occurs when an organization reports financial results materially different from what the company believes. Accounting fraud occurs when an organization fails to disclose its financial reports properly. Financial statement fraud is taking unauthorized actions with an organization's financial statements, usually to decrease the accuracy, increase confidence in the financial statement, or lower the level of disclosure of importance. The most common fraudulent situations were when an organization reports inflated or false revenue, profits, or cash position (Agostini et al., 2021). These misstatements can be classified as fraudulent statements or fraudulently omitting or altering financial statements. Fraudulent statements attempt to change actual incomes into revenue that never happened. Usually, the misstatement will result in the company's greatly increased profits. Fraudulently manipulating revenues can cause erroneous, Overstated financial statements, and fraudulently inflating shareholder investment returns.
Many times, companies will be found guilty of fraudulently misstatements of financial statements. They are guilty of financial statement fraud for not knowing the misstatements were occurring or purposely perpetrated. Fraud is aimed at an institution, an organization, or the job holder. Organizations are often targets of fraud, primarily because of their ability to secure funds, build payrolls, and marginalize profits. Misstatements can be identified by knowing what to look for when auditing financial statements. These are some of the misstatements that show financial statement fraud. The auditor should be concerned with the misstatement of assets, financing activities, revenue, expenses, and inventory. (Nindito et al., 2018)Misstatement in assets shows the company purporting to have more assets than they have, improperly classified or recorded assets, or underreported misstatements in inventory.
Misstatements of financial statements can be performed in certain ways. The three main types of misstatements of financial statements are fraudulent statements, fraudulent omissions, and fraudulent statements. In fraudulent statements, a party undertakes a means to inflate or deflate a particular amount on a financial statement. In fraudulent omissions, a party keeps a valuation disclosed but does not augment a specific amount. In a fraudulent statement, a party falsely reports a transaction as a material one, even though the transaction did not occur or did not have the effect that is being reported. These ways of misstatements are often the result of intentional fraud (Nindito et al., 2018). Care has to be taken in misstatements of financial statements because it can cause a company not to receive the revenue they should be receiving due to the fraudulent statement.
The consequences of misstatements of financial statements can be very severe. Many forms of fraud have strict liability attached to them. If certain frauds have been committed, you can be found guilty even if you have not directly or intentionally caused the fraud. Also, the severity of the fraud usually determines the severity of the penalties a violator can incur. Many forms of fraud have a mandatory minimum jail sentence, which means no matter the situation, the fraud must be followed by jail time.
Antifraud policies are required in certain sectors when it comes to misstatements. A corporation will require a hesitation of auditing when misstatements are in process in the company. The high risk of harm A company that has not been able to execute its financial statements properly in the past is in danger of being caught doing it again.
In financial audits, Misstatements of financial statements are key when auditing a possible misstatement situation. Auditors must always keep a watch out for a company when the company is publicly-traded. When a company is a public entity, misstatements can be found to a larger extent. Misstatements have to be performed in a very careful manner when a company is a public entity. The firm auditing the company will always have to be prepared for this when this is the case. These audits should be keenly investigated for misstatements and should always be stopped when signs of misstatement show. Auditors must