Financial-Statement Fraud
Definition
Intentional misstatement or omission in financial reports to deceive users of those reports, typically to inflate earnings, understate liabilities, or maintain a credit rating. The rarest Fraud Tree branch by frequency but the highest in median loss, often by an order of magnitude compared to the other branches.
Related terms
- Asset Misappropriation
- The largest Fraud Tree branch, covering schemes in which an employee steals or misuses the organisation's assets. Subcategories include cash schemes (skimming,...
- Corruption
- Schemes in which an employee misuses their position to gain a direct or indirect benefit, typically involving a third party. The four...
- Skimming
- An off-book cash theft: revenue is stolen before it enters the accounting system, so no entry is ever made. Skimming is harder...
- Cookie-Jar Reserve
- An accounting reserve built up in a period of strong earnings by overstating provisions or allowances, then released in a later period...
- Earnings Management
- The use of accounting choices, estimates, and timing decisions within the bounds of GAAP or IFRS to influence reported earnings. Permissible in...
- Materiality
- The threshold at which a misstatement or omission would influence the decisions of a reasonable user of the financial statements. Assessed both...
- Median Loss
- The loss figure at the midpoint of the distribution of cases, used in the ACFE's data because it is more representative of...
- Occupational Fraud
- The ACFE defines occupational fraud as the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the...
- Occupational Fraud Tree
- The ACFE's hierarchical classification of occupational fraud schemes, with three top-level branches (asset misappropriation, corruption, financial-statement fraud) subdividing into dozens of named...
- PFUTP Regulations 2003
- The Securities and Exchange Board of India's Prohibition of Fraudulent and Unfair Trade Practices (Relating to Securities Markets) Regulations 2003. The primary...
- Report to the Nations
- The ACFE's biennial global study of occupational fraud, compiled from cases submitted by Certified Fraud Examiners. Each edition analyses thousands of real...
- SEC Staff Accounting Bulletin No. 99 (SAB 99)
- A 1999 SEC interpretive release stating that the traditional five-percent quantitative threshold for materiality is not a safe harbour and that qualitative...
Explained in these topics
- The ACFE Fraud Tree and Occupational Fraud ClassificationIntentional misstatement or omission in financial reports to deceive users of those reports, typically to inflate earnings, understate liabilities, or maintain...
- The ACFE Occupational Fraud TaxonomyIntentional misstatement or omission of material information in financial reports to deceive users. Includes revenue overstatement, expense understatement, and...
- Earnings Management Versus Fraud: The ContinuumIntentional misrepresentation of financial statements that is material and outside what any recognised accounting standard permits. Constitutes a criminal offe...