C
Channel Stuffing
DEFINITION
Pushing excess inventory to distributors.
MEANING
Shifts risk downstream.
EXAMPLE
Forced end-of-quarter shipments.
E
Expense Manipulation
DEFINITION
Improper capitalization or deferral of expenses.
MEANING
Used to manipulate earnings.
EXAMPLE
Expenses deferred to future periods.
F
Financial Statement Fraud
DEFINITION
Financial statement fraud involves intentional manipulation of financial reports to present a misleading picture of an organization’s financial position.
MEANING
Compared to other forms of occupational fraud, it occurs less frequently but typically results in severe financial, legal, and reputational damage.
EXAMPLE
Premature recognition of revenue to inflate earnings.
H
Hidden Liabilities
DEFINITION
Omitting or concealing liabilities.
MEANING
Creates false financial strength.
EXAMPLE
Failure to record provisions.
I
Improper Asset Valuation
DEFINITION
Intentional misvaluation of assets.
MEANING
Distorts financial ratios.
EXAMPLE
Overstated inventory values.
Improper Disclosures
DEFINITION
Incomplete or misleading disclosures.
MEANING
Reduces transparency.
EXAMPLE
Omission of key risks.
M
Management Fraud
DEFINITION
Fraud committed by senior management.
MEANING
High impact and difficult to detect.
EXAMPLE
Executive-led financial manipulation.
R
Revenue Recognition Fraud
DEFINITION
Revenue recognition fraud involves intentionally recording revenue in a manner that does not reflect the underlying economic reality.
MEANING
It is a core financial statement fraud scheme aimed at inflating financial performance, often driven by pressure to meet earnings targets or incentive-based compensation. It can mislead investors, regulators, and other stakeholders.
EXAMPLE
Premature revenue recognition.
Round-Tripping
DEFINITION
Transactions with no economic substance.
MEANING
Artificially inflates revenue.
EXAMPLE
Reciprocal billing schemes.
U
Unusual Write-Offs Red Flag
DEFINITION
Unusual write-offs.
MEANING
May hide manipulation.
EXAMPLE
Large receivable write-offs.