Audit

Do numbers lie?

Corporate management has significant latitude in choosing what numbers to report and when. But business pressures can cloud their judgment. This article examines how using accounting gimmicks and manipulating financial statements might satisfy investors but can cross into fraudulent territory.

Inventory inflation schemes come in many flavors

In this edition, I’ll examine some recent cases involving improper accounting for inventory resulting in overstated assets. As with so many of the companies in the cases I profile, the players in two of the three cases were motivated primarily by a desire to meet published or internal goals for gross profit.

When do non-GAAP metrics become fraudulent publicity?

For years, companies reported their figures under GAAP or IFRS standards. But what happens when a company commingles the GAAP/IFRS-based financial information with other performance metrics in its reports and press releases? These extra measures have no standards, and no one audits them — perfect conditions for fraud.

Tax preparers gone wild

Many naïve taxpayers — who believe that all tax preparers have to be certified, licensed or regulated in some way — place their entire trust in supposed experts to handle one of the most serious dimensions of adult life.

Numbers manipulator describes Enron's descent

Nearly 15 years ago the actions of Enron’s C-suite executives led to the company’s demise. In this interview with Andrew Fastow, former Enron CFO, read how the toxic corporate culture and his rationalizations behind “finding the loopholes” led to one of the largest and most well-known cases of corporate fraud and corruption.

Won't get fooled again, but they'll try

With a nod to Pete Townshend and The Who, many auditors have expressed their determination to not get fooled again after being deceived by creative fraudsters. One of the underlying questions in many of the cases I’ve profiled is: “What did the auditors do?”

Roving signature stamp

Pamela Johnson, a low-level accounts assistant, had a hidden gambling problem and the trust of the Tompkins Consolidated Area Transit. Here’s how she exploited her employer’s confidence and how the external auditors actually discovered the devastating three-year fraud.

Dipping into the cookie jar

Companies sometimes employ cookie-jar reserves during periods of strong financial performance as cushions for the inevitable future periods when performance will decline.

Creative embezzlement

In many ways, Edith Chase fit one of the stereotypes of the traditional embezzler. She was a middle-aged woman in a mid-level accounting/bookkeeping job at a smallish business — wallpaper to most of the rest of the company after almost three decades of stolid, reliable work.

The link between corporate culture and fraud

The importance of the “tone at the top” in deterring fraud is a concept that most of us have read about in articles and studies. However, seeing tone at the top in practice and how it impacts an organization positively or negatively is the best way to understand exactly how this link works.

Exciting career path for CFEs

The author of our cover article, W. Steve Albrecht, Ph.D., CFE, CPA, CIA, writes that in 2013, more than 10 boards of directors asked him to join them, and during the past 12 years, he’s been on eight boards for public and private companies.

Thomas Boegballe, CFE

Thomas Boegballe, CFE, a Liverpool F.C. fan, always wanted to be a professional soccer player growing up. But as he grew older, and as he says, “more realistic,” he realized he wanted to work with people and numbers.