Recognizing the signs

Internal auditors can help their organizations manage the potentially catastrophic risk of fraudulent financial reporting by understanding the most common methods of earnings management and by sharing this knowledge with employees - who occupy positions where they might see, but not necessarily reco...

Full description

Saved in:

Bibliographic Details
Published in:	The Internal Auditor Vol. 60; no. 2; p. 64
Main Author:	Kokoszka, Richard J
Format:	Trade Publication Article
Language:	English
Published:	Altamonte Springs Institute of Internal Auditors, Incorporated 01-04-2003
Subjects:	Accounting Acquisitions & mergers Corporate profits Costs Earnings Earnings management Employee involvement Employees Executives Financial management Financial reporting Fraud Internal auditors Inventory Materiality Revenue recognition Risk management Sales United States > US
Online Access:	Get full text
Tags:	Add Tag No Tags, Be the first to tag this record!

Description
Summary:	Internal auditors can help their organizations manage the potentially catastrophic risk of fraudulent financial reporting by understanding the most common methods of earnings management and by sharing this knowledge with employees - who occupy positions where they might see, but not necessarily recognize, the symptoms. The following categories in which fraudulent financial reporting activity occurs are listed: 1. cookie jar reserves (also called general reserves, rainy day reserves, or contengency reserves), 2. big bath charges (one-time restructuring charges), 3. creative acquisition accounting, 4. abuse of materiality, 5. premature revenue recognition (recording revenue before a sale is completed), 6. postponing or not recognizing expenses, and 7. round-tripping, back-to-back, and swaps. Auditors should educate employees on how to report suspicions. Auditors should recognize that management is not always clearly wrong.
ISSN:	0020-5745