MANIPULATION OF FINANCIAL REPORTING:PREREQUISITES, CHARACTERISTICS AND WAYS OF DETECTION
Journal Title: Проблеми і перспективи розвитку підприємництва - Year 2014, Vol 1, Issue 6
Abstract
The global financial crisis has pointed public attention to the financial reporting authenticity. The worsening of the financial reporting index, as a result of the crisis, encourages companies to falsify the reporting data intentionally. There are many reasons of falsification – from accountant’s skill level up to plain index’s falsification, initiated by company’s management personnel. Return’s manipulation is the most common reason ofinadequate financial reporting. Manipulation of financial reporting is the deliberate falsification or hiding the information about company’s financial condition to influence the decisions of these returns users. The aim of reporting’s manipulation is to meet the expectations of certain users that will receive these returns. In practice, the use of accounting regulations (standards) provides a wide scope for fraud. Almost any index of financial reporting (sales proceeds of goods (works, services, total revenue, net financial results , etc.) can be potentially falsified. The objects of manipulation at the level of the financial reporting can also include: the system of accounting information’s building and processing; shortcoming of business processes and company’s internal controls. Whatever the motives, the real factor of fraud’s activities implementation is to carry out a particular action due to a lack of control or restrictions. That is why in recent years both financial community and companies management take to heart the reducing fraud risks, fraudulent activities classification, company's business environment monitoring and testing and information security systems. The problem of the financial reporting falsification requires an integrated approach. The best ways of reducing the risks of fraud and financial reporting falsification are the following: understanding the motivations; reducing «the fraud potentiality» or vulnerabilities in the company’s operational and organizational systems; external audit; establishing of internal controls; informing about fraud’s incidents.
Authors and Affiliations
Nelya Proskurina
Keywords
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