Financial Statement Fraud A Perfect Fraud Storm

Financial statement fraud is something that has become more commonplace than it should be. Many different events will often lead up to a rash of companies participating in financial statement fraud. Between the year 2000 and 2002 there were a number of factors that led to what appeared to be a perfect fraud storm according to our text (Albrecht, Albrecht, Albrecht, Zimbelman, 2012). Nine of those will be looked at here. It will also be discussed as to what some of the common ways financial statement fraud is concealed while looking at some of the common motivations for such fraud. With this, a look at ways of financial statement fraud exposures can be identified along with who usually will commit this type of fraud. Below is a list†¦show more content†¦This happened all too often because compensation for executives and many others in companies were tied to the stock price of the company to closely. It made it ripe for financial statement fraud to take place. The backdating of stock options became commonplace for executives to cash in in a fraudulent matter. The cause of this can also be viewed to go hand-in-hand with high analysts’ expectations for a given company. It was easy to see in hindsight, that analyst sometimes drove the direction of what earnings would actually be for a company. The fraud in many companies was tailored to the expectations that was listed on the street for the company. Moreover, for too many cases the expectations set by analysts were unrealistic and in no way sustainable by the company. (Albrecht et al., 2012, p. 361-362). The pressures of high levels of debt fueled the fraud storm that much more. Covenants and loans that have been obtained were at risk of being violated if earnings did not the companies were carrying. Earnings were essential to offset the high cost of interest that is being made the loans that were made to the company. In the year, 2002 there was 368 billion and in debt filed for bankruptcy in the United States. During this period WorldCom had the largest bankruptcy in history over 100 billion in debt by itself (Albrecht et al., 2012, p. 362). There was too much focus on accounting rulesShow MoreRelatedFraud : The Perfect Fraud Storm1420 Words   |  6 PagesFinancial Statement Fraud Option #2 The perfect fraud storm occurred between the years 2000 and 2002 involving two of the largest energy and telecom corporations in the United States: Enron and WorldCom. It was determined that both organizations fraudulently overstated assets, created assets from expenses or overstated revenues, costing investors billions of dollars and resulting in both organizations declaring bankruptcy (Albrecht, Albrecht, Albrecht Zimbelman, 2012). 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