Fraud Risk Assessment and Vulnerability final

Increasing the value of an assets salvage value

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Increasing the value of an asset's salvage value. Earnings management schemes are often more likely to occur when a company loses a line of business or customer and as a result may not be able to meet industry and/or company projections. The company, if publicly traded may attempt to manage earnings in order to maintain the facade of profitability and keep stock prices up. These schemes may also be used to overstate asset value in an effort to make the company more likely to qualify for loans. Management may have established sales quotas and employees might commit the fraud if they feel they are falling short of the quotas. Management may also be compensated based on company value. There is no money or revenue being exchanged. Nobody is adversely effected by my actions. Lack of oversight against changes in asset information. Recorded depreciation estimates are lower than they would be because the estimated useful life is longer. As a result the value of the asset is overstated. identify whether or not there is oversight or strict guidance relating to asset valuation and assigned salvage value and useful lives. Compare recorded useful life and salvage value of assets to industry standards. Round Tripping - recording transactions that occur between companies for which there is no economic benefit to either company Sales Representatives, upper, middle, and lower level management, the CFO, and anyone who is responsible for recording sales and purchases. Those individuals responsible for purchasing and selling assets may collude in an effort to increase revenue. This scheme may also be promoted by management. Companies can work together to buy and then sell assets to and from each other. Don’t disclose true nature of thee transaction in quarterly reporting. There may be a high number of transactions whose purpose is undiclosedand/or unclear. Earnings management schemes are often more likely to occur when a company loses a line of business or customer and as a result may not be able to meet industry and/or company projections. The company, if publicly traded may attempt to manage earnings in order to maintain the facade of profitability and keep stock prices up. These schemes may also be used to overstate asset value in an effort to make the company more likely to qualify for loans. Management may have established sales quotas and employees might commit the fraud if they feel they are falling short of the quotas. Management may also be compensated based on company value. There is no money or revenue being exchanged. Nobody is adversely effected by my actions. No laws eliminating the gray area regarding legal transactions and their related disclosures. Transactions booked as income even though no net cash was realized as a result of the transaction. The revenue is immediately recognized and the later expense is capitalized in order to inflate net income. This practice innapropriately recognizes revenue, inflating net income and overstating asset value.
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