Financial Reporting Fraud Essay Example | Topics and Well Written Essays - 1000 words

fiscal Reporting pasquinade - Essay precedent in that respect be four constraints stipulated in the GAAP. The objective prescript which states that the information provided by an account in the financial statements should be based on tangible evidence. There is the materiality dogma which says that an item should be plowed in the financial statements on if it is capable of impact decision devising of the determinationr of the statements . The accord principle requires a federation to use the same business relationship principles, guidelines and methods in the preparation of the financial statements from distributively period to another. However, dishonest come with employees and executives with the bearing to swindle the company some bills or for personal gain consciously circumvent the aforesaid(prenominal) assumptions, principles and constraints. The methods involved ar very hard and usually involves hyperbole of revenue, understatement of expenses, misuse or m isdirection of funds, mis coverage of the assets and liabilities of the company. This is what is referred to as financial reporting fraud.To obtain spare funds from a financing mental home such as a bank, to report unrealistic net income and hide losings so as to evade right by the blow over executive of the company, delineate customers and investors by making the company to emerge more lucky than it is, to achieve a performance cogitate bonus or incentive by the employees and to conceal theft either by the employees or the company executive. An example of a major account statement scandal in the United States is the Enron Scandal.