Fraud Prevention and Detection

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APPENDIX A: SUMMARY

OF RED FLAGS

This appendix is a quick reference to all the Red Flags that are outlined in

this book. They are listed under their respective headings.

FINANCIAL STATEMENT FRAUD RED FLAGS

• Overstating assets or revenues

• Understating liabilities or expenses

• Deliberately omitting or misrepresenting material information

used to prepare nancial statements

• Intentionally circumventing the proper application of account-

ing principles when recording material events, transactions,

and/ or accounts

• Understating the bad debt allowance for receivables

• Overstating the value of inventory, property, plant, and equip-

ment and other tangible assets

• Recording ctitious assets

Overstatements generally occur in the following busines ...