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Financial Statement Analysis:  Key to Identifying Fraud






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Financial Statement Analysis:  Key to Identifying Fraud. Breakout Session # 803 Juanita M. Rendon, MBA, CPA April 7, 2009 11:00 AM – 12:30 PM. Learning Objectives. Understand general fraud concepts. Understand basic financial statements and ratio analysis.
Financial Statement Analysis:  Key to Identifying Fraud

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Slide 2

Financial Statement Analysis: Key to Identifying Fraud

Breakout Session # 803

Juanita M. Rendon, MBA, CPA

April 7, 2009

11:00 AM – 12:30 PM

Slide 3

Learning Objectives

  • Understand general fraud concepts.

  • Understand basic financial statements and ratio analysis.

  • Understand the usefulness of ratio analysis as a tool in identifying potential fraud.

Slide 4

Overview

  • Fraud

    • Common Thread in Definitions

    • Types of Fraud

    • Fraud Triangle/Fraud Diamond

    • Incentives To Commit Financial Statement

      • Fraud

    • Financial Statement Fraud Issues

  • Basic Financial Statements

    • Standard Setting

    • Components of Financial Statements

  • Ratio Analysis

    • Categories of Financial Ratios

    • Ratio Analysis Usefulness as a Tool

Slide 5

WHY IS THIS IMPORTANT?

  • Fraudulent Activities Cost Billions of Dollars!

  • Contracting Managers Need To Be aware Of Potential Fraud.

Slide 6

ACFE 2008 Report To The Nation

On Occupational Fraud and Abuse

Study was based on 959 cases of fraud investigations by CFEs between Jan. 2006 & Feb. 2008

(ACFE, 2008)

Slide 7

ACFE 2008 Report To The Nation

On Occupational Fraud and Abuse

(ACFE, 2008)

Slide 8

Fraud Definition

Dictionary definition:

  • noun

    • deceit; trickery; cheating

    • LAW:intentional deception to cause a person to give up property or some lawful right

  • a person who deceives, is an impostor or a cheat

http://www.yourdictionary.com/fraud

Slide 9

ACFE Fraud Definition

  • Occupational fraud and abuse may be defined as: "The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources or assets."

    (Wells, Joseph T., 2008; ACFE, 2006)

Slide 10

DOD Fraud Definition

  • DOD defines fraud as follows:

    • Fraud is any intentional deception taken for the purpose of inducing DOD action or reliance on that deception. Fraud can be perpetrated by DOD personnel—whether civilian or military—or by contractors and their employees.

(GAO,2006, June 19, Contract Management: DOD Vulnerabilities to

Contracting Fraud, Waste, and Abuse, )

Slide 11

IRS Fraud Definition

  • Fraudis deception by misrepresentation of material facts,… resulting in material damage to one who relies on it and has the right to rely on it…

  • Tax fraud is often defined as an intentional wrongdoing on the part of a taxpayer, with the specific purpose of evading a tax known or believed to be owing.

    Tax fraud requires both:

    • An underpayment; and

    • A fraudulent intent.

(Internal Revenue Service, Internal Revenue Manual 25.1.1.2 (05-19-1999))

Slide 12

GOVERNMENT

PROCUREMENT

FRAUD

(Purchase Cards)

TAX

FRAUD

(Federal Income Tax)

MORTGAGE

FRAUD

(Sub-prime Loans)

TYPES

OF

FRAUD

EMPLOYEE

FRAUD

(Payroll Fraud)

FINANCIAL

STATEMENT

FRAUD

(Enron, WorldCom)

CONSUMER

FRAUD

(Identity Theft)

COMPUTER

INTERNETFRAUD

(Cyber Theft)

HEALTHCARE

FRAUD

(Medicare Fraud)

Slide 13

The Fraud Triangle

  • Criminologist Donald R. Cressey (1919-1987)

    • While researching his doctoral dissertation in the 1950s, developed a hypothesis to explain why people commit fraud.

    • Published “Other People’s Money: A Study in the

      Social Psychology of Embezzlers”

  • Dr. Cressey interviewed 200 inmates at prisons in the Midwest

  • Three key elements:

    • Incentive/Motivation/Pressure

    • Opportunity

    • Rationalization

(Wells, Joseph T., 2008)

Slide 15

  • Capability Traits:

  • Position/Function

    • Authority

    • Influence

  • Brains

    • Knowledge

  • Coercion Skills

  • Confidence/ego

  • Effective Lying

(Wolfe, David T.,& Hermanson, Dana R., 2004, December)

Slide 16

Understated

Liabilities/Expenses

Overstated

Assets/Income

Fictitious

Revenue/

Accounts

Receivable

Fraudulent

Financial

Statement

Issues

Inventory/

Cost of Goods Sold

Timing Or

Classification

Issues

Disclosure/

Lack Of

Transparency

Improper

Asset

Valuation

Other

Slide 17

Overview of Financial Statements

Most businesses prepare :

  • 1. Income Statement

  • 2. Balance Sheet

  • Statement of Cash Flows

  • Statement of Stockholders’ Equity

  • Statement of Retained Earnings

In the U. S., financial statements are based on

Generally Accepted Accounting Principles (GAAP).

(Albright & Ingram, 2006)

Slide 18

Overview of Financial Statements

Standard Setting Organizations

The Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) oversee the publically tradedcompanies.

The Financial Accounting Standards Board (FASB) (American Institute of Certified Public Accountants -- AICPA) oversees the privatecompanies.

(Albright & Ingram, 2006)

Slide 19

Standard Setting Organizations

The Governmental Accounting Standards Board (GASB)sets accounting standards for state & localgovernments

The U. S. Government Accountability Office (GAO) oversees accounting in the federal government.

The International AccountingStandards Board (IASB) is an independent, privately-funded board interested in global accounting standards(International Financial Reporting Standards).

(Albright & Ingram, 2006)

Slide 20

Overview of Financial Statements

Sources of Accounting Regulations

The Sarbanes-Oxley Act (SOX) was passed by Congress in 2002. This act affected the responsibilities of auditors, boards of directors, and corporate managers with respect to financial reporting. The primary purpose was to increase investor confidence.

(Albright & Ingram, 2006)

Slide 21

The Auditors’ Report

Auditing standards include procedures used in conducting an audit to help auditors form an opinion about the fairness of the audited statements. (GAAS: Generally Accepted Auditing Standards). For the federal government, the Generally Accepted Government Auditing Standards (GAGAS) are used.

(Albright & Ingram, 2006)

Slide 22

Overview of Financial Statements

The Income Statement (Statement of Earnings) reports revenues and expenses for an accounting period.

(Albright & Ingram, 2006)

Slide 23

ABC Company, Inc.

Income Statement

For the Year Ended December 31, 2008

Sales revenue $700,500

Cost of goods sold (450,200)

Gross profit 250,300

Depreciation Expense (60,000)

Selling, general, & administrative exp. (90,300)

Operating income 100,000

Interest expense (5,000)

Pretax income 95,000

Income taxes (40% tax rate) (38,000)

Net income $ 57,000

Slide 24

Overview of Financial Statements

A Balance Sheet (Statement of Financial Condition) identifies a company’s assets and claims to those assets by creditors and ownersat a specific date.

(A = L + SE) (a snapshot)

Slide 25

ABC Company, Inc.

Balance Sheet

At December 31, 2008

Assets

Current assets:

Cash $ 12,600

Accounts receivable 9,600

Merchandise inventory 22,000

Supplies 800

Prepaid rent 1,000

Total Current Assets $ 46,000

Long-term (Fixed) Assets:

Property and equipment, at cost 300,000

Less Accumulated depreciation (60,000)

Total Long-term (Fixed) Assets $240,000

Total Assets$286,000

Continued

Slide 26

Liabilities and Stockholders’ Equity:

Current Liabilities:

Accounts payable $ 8,500

Unearned revenue 3,800

Interest payable 700

Notes payable, current portion 4,000

Total Current Liabilities $ 17,000

Long-term liabilities:

Notes payable, long-term 80,000

Total Liabilities$ 97,000

Stockholders’ equity:

Common stock 150,000

Retained earnings 39,000

Total Stockholders’ Equity $189,000

Total Liabilities and Stockholders’ Equity $286,000

Slide 27

Must Equal

ABC Company, Inc.

Balance Sheet

At December 31, 2008

Assets:

Total assets$286,000

Liabilities and Stockholders’ Equity

Total Liabilities and Stockholders’ Equity $286,000

Slide 28

Assets

Stock-holders’ Equity

Liabilities

=

+

Economic Resources Owned by a Business

The Financial Obligations or Debts of a Business

Owners’ Claims on the Assets of a Business

The Basic Accounting Equation

(Albright & Ingram, 2006)

Slide 29

Overview of Financial Statements

The Statement of Cash Flows reports events that affected a company’s cash account during a fiscal period; has three sections: operating, investing, & financing.

(Albright & Ingram, 2006)

Slide 30

The Statement of Cash Flows

Operating activities involve the buying or producing and the sale & distribution of goods and services to customers related to cash.

Investing activities involve the buying and selling of long-term assets.

Financing activities involve transactions between a company and its owners or creditors.

(Albright & Ingram, 2006)

Slide 31

The Statement of Cash Flows

GAAP permits the statement to be presented in either of two formats: direct or indirect.

GAAP requires a schedule to reconcile cash flows from operating activities with net income if the direct format is used.

The differences between formats are in the operating section only. 99% of companies use the indirect method.

(Albright & Ingram, 2006)

Slide 32

From the income statement

ABC Company, Inc.

Statement of Cash Flows

For the Year Ended December 31, 2008

Indirect

Operating Activities

Net income $ 57,000

Depreciation exp. (noncash) 60,000

Increase in accounts receivable (CA) (20,000)

Increase in merchandise inventory (CA) (32,000)

Increase in supplies (CA) (1,200)

Increase in prepaid rent (CA) (5,000)

Increase in accounts payable (CL) 6,600

Increase in unearned revenue (CL) 3,000

Increase in interest payable (CL) 400

Net cash flow from operating activities $ 68,800

Slide 33

Carried forward $ 68,800

Investing Activities

Payments for purchase of equipment (231,700) Receipts from sale of equipment 500

Net cash flow for investing activities(231,200)

Financing Activities

Receipts from sale of common stock 150,000

Payment of dividends(20,000)

Receipts from borrowing 60,000

Repayment of debt (15,000)

Net cash flow from financing activities 175,000

Net increase in cash 12,600

Cash balance, December 31, 2007 0

Cash balance, December 31, 2008 $ 12,600

Slide 34

Statement of Stockholders’ Equity

Statement of Stockholders’ Equity

CCRETotal

Balance at Jan. 1, 2008 $ 0 $ 2,000 $ 2,000

+ Common Stock Issued 150,000 150,000

+ Net Income 57,000 57,000

- Dividends ______ <20,000><20,000>

= Balance at Dec.31, 2008 $150,000 $39,000 $ 189,000

This statement links the income statement

to the balance sheet. It describes how much

Net Income was reinvested as part of RE.

(Albright & Ingram, 2006)

Slide 35

Statement of Retained Earnings

This shows the amount of Net earnings (NI) retained by the company and the dividends

distributed to shareholders. RE is part of the B/S.

(Albright & Ingram, 2006)

ABC Company, Inc. Statement of Retained Earnings For the Year Ended December 31, 2008

  • Retained Earnings, Jan. 1, 2008 $ 2,000

  • Net income for 2008 57,000

  • Less: Dividends (Pmt. to Stkhldrs) (20,000) 37,000

  • Retained Earnings, Dec. 31, 2008 $39,000

Slide 36

Overview of Financial Statements

Title of Slide

Slide 37

Financial Statement Analysis Methods

(Brigham & Houston, 2007)

  • Vertical Analysis: involves measuring relationships between items for a single year. For example, % of sales on an income statement; % of total assets & % of total Liabilities & Stockholders’ Equity on a balance sheet

  • Horizontal Analysis: involves calculating the Dollar change and the Percent change for each line item on the Income Statement or Balance Sheet from the previous year to the current year.

    Current year – Previous year/Previous year x 100 = % change

  • Ratio Analysis:Various ratios

Slide 38

Why are ratios useful?

(Brigham & Houston, 2007)

  • Ratios can standardize numbers and facilitate comparisons.

  • Ratios can be used to highlight weaknesses and strengths.

  • Ratio comparisons should be over a period of time and with competitors in the same industry

    • Trend analysis

    • Industry analysis

Slide 39

Five Major Categories Of Ratios

(Brigham & Houston, 2007)

Liquidity (Solvency): Can the company meet its short-term obligations?

Asset management (Operating Efficiency): Is the company using its assets to generate sales?

Debt Management: Does the company have the right mix of debt and equity? Is the company highly leveraged?

Profitability: Is the company consistently making a profit? Is the company managing its expenses?

Market Value: Do investors like what they see?

Slide 40

Five Major Categories Of Ratios

Prepared by Juanita M. Rendon, CPA

Slide 41

2008

100,800

900,800

2,148,800

3,150,400

1,800,000

- 899,400

900,600

4,051,000

2007

8,000

630,000

1,300,000

1,938,000

1,300,900

- 400,000

900,900

2,838,900

TYL, Inc.: Balance Sheet

(Brigham & Houston, 2007)

Cash

Accts. Receivable

Inventories

Total Current Assets

Gross L-T Assets

Less: Acc. Depreciation

Net L-T Assets

Total Assets

Slide 42

2008

430,700

250,000

450,000

1,130,700

500,000

1,630,700

2,084,574

335,726

2,420,300

4,051,000

2007

530,100

600,800

490,000

1,620,900

800,000

2,420,900

387,500

30,500 418,000

2,838,900

Liabilities and Equity:

(Brigham & Houston, 2007)

Accts. payable

Notes payable, current

Unearned Revenue

Total Current Liab.

Long-term debt

Total Liabilities:

Stockholders’ Equity:

Common stock

Retained earnings

Total Stkhldrs Equity

Total Liab. & Equity

Slide 43

TYL, Inc.: Income Statement

2008

7,000,600

(5,800,990)

1,199,610

(500,000)

699,610

(110,900)

588,710

( 80,000)

508,710

( 203,484)

305,226

2007

4,500,000

(3,500,000)

1,000,000

( 500,900)

499,100

( 100,900)

398,200

( 130,000)

268,200

(107,280)

160,920

(Brigham & Houston, 2007)

Sales

COGS

Gross Profit (GM)

Other expenses

EBITDA

Depr. & Amort.

EBIT

Interest Exp.

Earnings Before Taxes

Taxes (40% tax rate)

Net income

Slide 44

2008

150,000

$2.035

$12.57

2007

100,000

$1.609

$8.85

TYL, Inc.: Other data

(Brigham & Houston, 2007)

No. of shares

EPS

Stock price

Slide 45

Financial Analysis: Liquidity Ratios

TYL Inc.’s forecasted current ratio and quick ratio for 2008:

(Brigham & Houston, 2007;

Fraser & Ormiston, 2010)

Current ratio = Current assets / Current liabilities

= $3,150,400 / $1,130,700

= 2.79x

Quick ratio = (CA – Inventories) / CL

= ($3,150,400 – $2,148,800) / $1,130,700

= 1,001,600/1,130,700

= 0.89x

Slide 46

Financial Analysis: Liquidity Ratios

Comments on liquidity ratios

  • Measure short-run solvency—the ability of a co. to meet its short-term debt requirements as they come due.

  • For 2008, Co. had $2.79 of CA for $1 of CL; For 2008, Co. has $ .89 of cash & near cash assets for every $1 of CL.

  • Below industry average; Liquidity position is weak.

  • The higher the liquidity ratios, the better.

(Brigham & Houston, 2007;

Fraser & Ormiston, 2010)

Slide 47

Financial Analysis: Asset Management Ratios

The inventory turnover vs. the industry average: (2008)

Inv. turnover = Sales / Inventories

= $7,000,600/$2,148,800

= 3.26x = 3.3x

(Brigham & Houston, 2007)

Slide 48

Financial Analysis: Asset Management Ratios

What is the inventory turnover vs. the industry average?

  • Indicates the number of times a company sells its average inventory level during the year.

  • Inventory turnover is below industry average.

  • The company might have old inventory, or its control might be poor.

  • A higher inventory turnover is usually better.

(Brigham & Houston, 2007)

Slide 49

Financial Analysis: Asset Management Ratios

(Days Sales Outstanding) DSO is the average number of days after making a sale before receiving cash. (2008)

(Brigham & Houston, 2007)

DSO = Accounts Receivable / Avg sales per day

= Accounts Receivable / (Annual sales/365)

= $900,800 / ($7,000,600/365)

= $900,800/19,179.73

= 47.0 days

Slide 50

Financial Analysis: Asset Management Ratios

Analysis of Days Sales Outstanding

  • Measures the number of days between the sale date and the cash collection date.

  • The company is below industry average; it collects on sales on account (A/R) too slowly

  • It appears to have a poor credit policy.

  • A lower DSO is usually better.

(Brigham & Houston, 2007)

Slide 51

Financial Analysis: Asset Management Ratios

Fixed assets (FA) and total assets (TA) turnover ratios vs. the industry average (2008)

(Brigham & Houston, 2007)

FA turnover = Sales / Net fixed assets

= $7,000,600/$900,600 = 7.8x

TA turnover = Sales / Total assets

= $7,000,600/$4,051,000 = 1.7x

Slide 52

Financial Analysis: Asset Management Ratios

Evaluating the Fixed (Long-term) Asset Turnover and Total Asset Turnover Ratios:

  • Measure efficiency; Show how many sales $ a co. can generate from each $1 of its assets.

  • In 2008, FA turnover is below the industry avg.

  • TA turnover is below the industry average. May be caused by excessive currents assets (A/R and Inventory).

(Brigham & Houston, 2007)

Slide 53

Financial Analysis: Debt Management Ratios

The debt ratio (D/A) and times-interest-earned (TIE) ratios. (2008)

(Brigham & Houston, 2007)

Debt ratio = Total debt / Total assets

= ($1,130,700 + $500,000/$4,051,000

= 1,630,700/4,051,000

= 40.3%

TIE = EBIT / Interest expense

= $588,710/$80,000 = 7.4x

Slide 54

Financial Analysis: Debt Management Ratios

How do the debt management ratios compare with industry?

  • Debt to Asset Ratio (debt ratio) shows the % of each $1 of assets that is financed with debt.

  • Times Interest Earned (TIE) ratio measures a company’s ability to pay the interest on its debt. For 2008, the co. has available $7.40 of earnings before interest and taxes for each $1 of interest it must pay to its creditors.

(Brigham & Houston, 2007)

Slide 55

Financial Analysis: Debt Management Ratios

How do the debt management ratios compare with industry?

  • D/A and TIE for 2008 are worse than the industry average,

  • A lower debt ratio (D/A) is usually better.

  • A higher TIE is better.

(Brigham & Houston, 2007)

Slide 56

Financial Analysis: Profitability Ratios

Profitability ratios: Net Profit margin (NPM) (2008)

(Brigham & Houston, 2007)

Net Profit margin = Net income / Sales

= $305,226/$7,000,600 = 4.4%

Slide 57

Financial Analysis: Profitability Ratios

Analyzing profitability with the net profit margin

  • NPM represents the company’s ability to translate sales dollars into profits; a higher NPM is better.

  • Net Profit margin was below the industry average in 2006 and 2007, but is exceeded the industry average in 2008.

(Brigham & Houston, 2007)

Slide 58

Financial Analysis: Profitability Ratios

Profitability ratios: Return on assets and Return on equity(2008)

(Brigham & Houston, 2007)

ROA = Net income / Total assets

= $305,226/$4,501,000 = 7.5%

ROE = Net income / Total Stkhlders equity

= $305,226 / $2,420,300 = 12.6%

Slide 59

Financial Analysis: Profitability Ratios

Analyzing profitability with the return on assets & return on equity

  • ROA shows how much profit a co. is able to earn from each $1 of its assets. For 2008, the co. is earning 7.5 cents for each $1 of assets.

  • ROE shows how many cents are earned on each $1 of stockholders’ investment. For 2008, the co. is earning 12.6 cents for each $1 of its owners’ investment (equity).

  • Both ratios are below the industry average.

(Brigham & Houston, 2007)

Slide 60

Financial Analysis: Asset Management Ratios

Analysis of Sales Growth Index

(Harrington, 2005; Beneish, 1999)

Slide 61

Financial Analysis: Asset Management Ratios

Analysis of Gross Margin Index

(Harrington, 2005; Beneish, 1999)

Slide 62

Financial Analysis: Asset Management Ratios

Analysis of Days’ Sales in Receivables Index

(Harrington, 2005; Beneish, 1999)

Slide 63

Financial Analysis: Asset Management Ratios

Analysis of Asset Quality Index

Asset Quality Index = (1 – [(CA + Net FA)/Total Assets] Current Year)

(1- [(CA + Net FA)/Total Assets] Prior Year)

Asset Quality Index = (1 – [(3,150,400 + 900,600)/4,051,000]

(1-[(1,938,000 + 900,900/2,838,900]

Asset Quality Index = (1 – [4,051,000/4,051,000] = 1.000

(1-[2,838,900/2,838,900]

(Harrington, 2005; Beneish, 1999)

Slide 64

Example of Financial Statement Fraud

(Wells, August 2001; Beneish, 1999)

Slide 65

(Wells, August 2001; Beneish, 1999)

Slide 66

Sales Growth Index = Current Period Sales/Prior Period Sales

Non-manipulators’ mean: 1.134

Manipulators’ mean: 1.607 and above

(Wells, August 2001; Beneish, 1999)

Slide 67

Asset Quality Index = (1 – CA + Net FA/Total Assets Current Year)

(1-CA + Net FA/Total Assets Prior Year)

Non-manipulators’ mean: 1.039

Manipulators’ mean: 1.254 and above

(Wells, August 2001; Beneish, 1999)

Slide 68

Usefulness of Financial Ratio Analysis:

(Williams, Haka, Bettner, & Carcello, 2008)

  • Quickly evaluate a company’s financial position & profitability.

  • Used for trend analysis within a company over a period of years.

  • Can compare the financial strength of different companies.

Slide 69

  • Revenues Tied To One Key Customer, Product, Or Supplier

  • Competition

  • Future Prospects

  • Qualitative Factors

  • Legal Environment

  • Regulatory

  • Environment

Qualitative Factors in Financial Statement Analysis

(Brigham & Houston, 2007)

Slide 70

  • Different Accounting Practices

  • Inappropriate Industry Comparisons

  • Industry Trends; Seasonal

  • Technological Changes

  • Economic Factors

  • Limitations of FS Ratio Analysis

Limitations of Financial Statement Ratio Analysis

Analysts should look beyond the ratios.

(Albright & Ingram, 2006)

Slide 71

  • Delay in providing information

Omission of

Transactions

  • Use of Historical Costs

  • Omission of resources & costs

  • Limitations of FS

Limitations of Financial Statements

  • Use of Estimates

Analysts should research company & industry.

(Albright & Ingram, 2006)

Slide 72

Efforts to Prevent & Detect Fraud

  • ACFE Educational Anti-fraud Resources

  • AICPA Antifraud & Corporate Responsibility Center

  • Sarbanes Oxley Act of 2002

Slide 73

Free Information Sources

  • SEC Edgar Database

    http://www.sec.gov/search/search.htm

  • Yahoo Finance

    http://finance.yahoo.com/

  • Company Websites

  • http://www.bizstats.com/

Slide 74

Summary

  • Fraud

    • Common Thread in Definitions

    • Types of Fraud

    • Fraud Triangle/Fraud Diamond

    • Incentives To Commit Financial Statement

      • Fraud

    • Financial Statement Fraud Issues

  • Basic Financial Statements

    • Standard Setting

    • Components of Financial Statements

  • Ratio Analysis

    • Categories of Financial Ratios

    • Ratio Analysis Usefulness as a Tool

Slide 75

THANK YOU FOR YOUR ATTENTION!

CONTACT E-MAIL:

jmrendon@nps.edu

Slide 76

QUESTIONS?

Slide 77

References

Albright, T. L., & Ingram, R. W. (2006). Financial accounting: A bridge to decision-making. 6th Edition. Mason, OH: Thomson South-Western.

ACFE 2008 Report to the Nation on Occupational Fraud and Abuse. (2008)

Beneish, M. D. (1999, September/October). The detection of earnings manipulation. Financial Analyst Journal. 55(5), 24-36.

Brigham, E. F., & Houston, J. F. (2007). Fundamentals of financial management. 5th Edition. Mason, OH: Thomson South-Western.

Fraser L. M. & Ormiston, A. (2010). Understanding Financial Statements, 9th Edition. New York, NY: Prentice Hall

Fraud definition. (n.d.) Retrieved from http://www.yourdictionary.com/fraud

Slide 78

References (continued)

Fraud Definition. Internal Revenue Service. Internal Revenue Manual § 25.1.1.2 (05-19-1999) Retrieved from http://www.irs.gov/irm/part25/ch01s01.html#d0e43

GAO. (2006, June 19).Contract Management: DOD Vulnerabilities to Contracting Fraud, Waste, and Abuse. GAO Code 120518/GAO-06-838R.

Harrington, C. (2005, March/April). Formulas for detection: Analysis ratios for detecting financial statement fraud. Fraud Magazine. Association of Certified Fraud Examiners. Retreived January 15, 2009, from http://www.acfe.com/resources/view-content.asp?ArticleID=416

Rosplock, M. F. (2001, June). Advanced analytical techniques for performing forensic financial analysis. Business Credit. 103(6), 26-31.

Slide 79

References (continued)

Well, Joseph T. (2008). Principles of Fraud Examination. 2nd Edition. Hobken, NJ: John Wiley & Sons, Inc.

Wells, J. T. (2001, August). Irrational Ratios. Journal of Accountancy. 192(2), 80-83.

Williams, J. R., Haka, S. F., Bettner, M. S., & Carcello, J. V. (2008). Financial & managerial accounting: The basis for business decisions. 14th Edition. New York, NY: McGraw-Hill/Irwin.

Wolf D. T. & Hermanson, D. R. (2004, December). The fraud diamond: Considering the four elements of fraud. The CPA Journal. 38-42.


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