Asia Report - FTI Global Insights
July 1, 2011
Chairman, Asia Pacific Region
In this edition of the Asia Report, Mark Chadwick and Catherine Williams share their insights on Financial Statement Fraud.
Many frauds are only discovered when a company enters (or just before it enters) formal insolvency proceedings.
They look at the ways in which the management of companies might use accounting information to mislead stakeholders. Financial misstatement was the most expensive category of occupational fraud during 2010, and is something that investors looking at opportunities in Asia need to be increasingly aware of.
The insolvency arena will always be a rich picking ground for the fraud investigator. It is well known by practitioners and academics alike that fraud follows a recession. The game of musical chairs comes to an end when the recession bites and invariably, companies built like a house of cards are exposed by their fraudulent activities.
An important aspect of both a boom and bust is the role of accounting information and the way by which management may use it to mislead stakeholders, commonly referred to as financial statement fraud.