Essentials Of Financial Statement Fraud In UAE Firms

Falsifying balance sheets, preparation of faulty of cash flow and income statements along with many other categories, are common ways to commit financial statement fraud in the UAE. And they’re critical to identify because the Emirati audit process takes into account a company’s financial statements.

Any faults in the statements may be considered a company’s incompetence or fraud schemes. Although there are numerous types of accounting frauds, but fraud in financial statement remains one of the major ones. Not to worry though, the best auditors can help identify any misleading financial statement during the audit process.

It's important to hire the top audit firms in Dubai to not only audit your firm's financial processes but also to ensure that any financial statement manipulation can be identified before they bulldoze the company completely. The article highlights some essentials of these frauds.

What You Need To Know About Financial Statement Fraud

Financial statement fraud may be a thing, but it's important to know why an employee would be involved in such practices? What are the warning signs of such heinous actions? And what are the common tricks involved in committing such frauds that employees use? Read on to know more on each of these factors:

Why Would Someone Lie About Finances?

There may be many reasons for lying. However, the most common causes involve personal gains. For example, an employee’s actual bonus may depend on the revenue they collect which is why they could be falsifying the actual finance statement. In case a company isn't doing well, financial statements may be hoaxed to keep the upper management happy.

However, it's not always about money. Some companies may even manipulate accounts to appear healthier to investors. This is done by inflation of income and asset values or by presenting a smaller amount of the company's debts.

How Financial Statement Frauds are done?

• Send items to customers that don’t exist in reality, and then credit company accounts for the sale.
• By pre-billing customers for their next purchase, the fraudsters can report nonexistent revenue.
• Report expenses later, to create a healthier spending
• Any stocks that lose value should be shown on balance sheets; however, some companies or employees may prefer not to show it and make the value higher.

Critical Giveaways for the Fraud

Auditors and the financial statement fraud experts both agree that there are several ways to detect such activities. They focus on the employees and the paperwork that can help detect the wrongdoings within a company or for other companies. Employees who are often responsible include:

• Accountants or managers living beyond means
• People in financial difficulties
• People under a lot of pressure to perform better and generate revenue
• Employees who like to be in control of everything
• The documents can also pose as telltale signs when:
• Documents are missing or appear altered
• The presence of unexplainable items
• The cash flow remains the same while revenue grows
• The end of the fiscal year sees an increase in the company’s performance
• Loans and bonuses that can be explained.

Take Away

The presence of or a combination of these factors should be enough reason to worry about the company’s financial health. Opt for the top audit firms in Dubai and get timely audits for your firm. Work with the auditors to work out where your employees may be going wrong!