Manipulation of a company’s financial position can be difficult to prevent when carried out by a senior staff member. Chartered accountants are well placed to help organisations assess whether controls are sufficiently robust to detect and deter fraudulent behaviour.
ICAEW has created a series of videos examining real-life cases of businesses that have been hit by fraudulent activity.
In the third video, we look at the example of a chief financial officer who manipulated his company’s accounts to support its share price, and highlight four ways that organisations can deter similar false accounting frauds.
False accountanting fraud typically involves the preparation and presentation of financial statements with the intention of misleading the user of the accounts. There are a number of reasons why an individual might want to prepare misleading financial information from securing additional funding to obtaining performance-related bonuses, and in some cases being pressured into it by the CEO.
Omid Tissier, Economic Crime and Ethics Manager at ICAEW, said: “Where manipulation of a company’s financial position is carried out by someone senior in the organsiation, detection and prevention can be challenging, which underlines the importance of an effective and widely communicated whistleblowing procedure alongside robust internal controls."
More information on fraud
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- HMRC additional needs working group
Company reform and economic crime
The Economic Crime Act 2022 became law in March and part two of the bill is incoming. From risks to required changes, we explore key considerations for accountants on the issue.