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Financial Shenanigans

This paper attempts to throw light on the types of financial shenanigans.

Accounting racket characteristically take places in larger organizations across the country as a result of offering bogus information, misusing funds, overstating revenues, understating revenues, exaggerating the significance of communal assets and underreporting the subsistence of liabilities. The officially permitted characterization of accounting scam is intentionally falsifying accounting records, such as sales or expenditure records, in order to boost net income or sales figures. Civil proceedings can be brought about upon not only the organization occupied in accounting fraud but also persons involved in the development. Accounting fraud typically takes place when an organization fails to account a chunk of its income to the authorities or exaggerates its profits to the authorities when filing its taxes.

Inaccurate Books

One technique of accounting swindle includes the keeping of erroneous books by an organization or other big business. Erroneous books are characteristically the objective of most Securities and Exchange Commission investigations. When an organization keeps inaccurate books it means that they are not reporting all of the necessary information in the books that they should be reporting. For example, if a conglomerate employs books to record on daily basis sales they might mark down higher sale prices on a few items to pump up their earnings. The organization might also underreport their earnings to avoid paying high taxes.

Presenting False Information

Another form of securities deception widespread across the country today includes representing counterfeit information intentionally for economic gain. An organization will present phony information to their financial advisors, workers, consumers and other authorities when it comes to their accounting practices and other financial bodies. The exercises that fall into this category include the acceleration of accounting expected expenses, the holdup of accounting expected income, engaging in off balance sheet dealings or reporting and approximating unadventurous estimates of forthcoming earnings of the organization. Inaccurate books and presenting false information are two of the most common forms of accounting fraud that takes place in organizations today.

A list of other frauds have been given below:

1.     Recording revenue when future services remain to be provided

Recorded revenue before shipment or before the client’s unconditional acceptance

Selling to an affiliated party

Recording revenue even though the customer is not obligated to pay

Grossing up revenue  

Recording sales that lack economic substance

Recording investment income as revenue

Improperly inflating amount included in a special charge

Creating sham rebates

Accelerating discretionary expenses into current period

Failing to write down or write off impaired asset

Reducing assets reserves

Reducing liabilities by changing in accounting assumptions

Boosting profits by selling undervalued assets

Amortizing costs too slowly

Recording as revenue supplier rebates tied to future required purchases

Releasing revenue that as improperly held back before a merger

Improperly writing off in-process R&D costs from an acquisition

Creating income by reclassification of balance sheet accounts

Reporting investment income or gains as a reduction in operating expenses

Creating reserves and releasing them into income in a later period

Giving the customer something of value as a quid pro quo

Recording cash received in lending transactions as revenue

 Including investment income or gains as part of revenue

Capitalizing normal operating costs, particularly if recently changed from expensing.

Recording bogus revenue

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