The Problem of Accounting Fraud

Question: Discuss the problem of accounting fraud. How can it be detected and controlled, and how can this help corporate growth? Answer: Abstract The definition of accounting fraud is any change in the accounting record in revenues, sales, and expenses that led to misrepresent a companys financial status. This has been addressed as a major problem for companies (Business Dictionary, n.d.). There are different types of accounting fraud. First type that can reflect in a companys financial statement is stock. Second type is a real estate asset. Companies have set strategies and improved couple ways to detect, eliminate, and control accounting fraud. Some of the strategies that have been used by companies to detect accounting fraud are comparison between prices on the market with sales of the company and auditing the financial statement of the company. On the other hand, to control accounting fraud, companies have implemented advanced audit systems. A good auditing system will eliminate fraud activity from happening. Body Section 3 (Deceptively Manipulate Accounting) Deceptively manipulate accounting can occur in two methods. These two methods are inflating or deflating profits. Inflating profit happened when inserting deceitful and higher numbers than actual over time (Yu, 2013). This is used to support the companys position in getting great deals in borrowing since its ability to meet debt obligation is high by showing wrong financial information. An example of inflating profit is when a company logs into its balance sheet a total value of its assets higher than actual. This type of fraud is exacerbated when the company presents its obligations to creditors as less than they are, in reality, and raise the value of its assets (Yu, 2013). Another method of deceptively manipulate accounting is by hiding some of the current income to cover the deficit in the future. Steady performance or even increase in the company will appear even if the company is losing. However, the main reason behind hiding some of the companys income is to avoid taxation. Th is method of deceptively manipulate accounting will assure companies illegally pay fewer taxes and get supported for aid requests and trade tariff protection from the trade authorities. Companies can get the benefit from doing so by paying less cash to shareholders (Yu, 2013). References Accounting fraud. (N.d). In Business Dictionary. (2014) Retrieved from https://www.businessdictionary.com/definition/accounting-fraud.htmlYu, X. (2013). Securities Fraud and Corporate Finance: Recent Developments. Managerial Decision and Economics, Forthcoming, 34, 439-450. DOI: 10.1002/mde.2621.