Financial Accounting Review

• The Background to Financial Reporting
  • Structure of financial reports
  • Regulation of financial reporting
  • Legislation
  • Financial reporting standards
  • Concepts and conventions
  • The framework
• The Analysis of Financial Reports
  • Ratio analysis
  • Statistical and graphical analysis of financial reports: how can fixed costs be less than zero?
  • Detecting bias in accounting numbers
  • Qualitative analysis: what people say and what they might mean

What is creative accounting and why is it a bad thing?

• Earnings management

• Inappropriate accruals and estimates
• Excessive provisions
• Recognizing premature revenue recognition
• Fictitious revenue
• Aggressive capitalization
• Creative income statements: classification and disclosure
• Problems with cash flow reporting

• The basics of forensic accounting
• The going concern concept in greater detail
• Cases in which forensic accounting was used
• Off balance sheet finance
• Introduction to Benford’s Law

Cases from the energy sector will be used here

The Role of the Auditor and Detecting Fraud

• The Role of the Auditor in the Prevention and Detection of Fraud
• Deterring Fraud
  • The fraud triangle
    • Why?
    • Who?
    • How?
• The COSO “Internal Control – Integrated Framework,” (COSO Model)
• 20 ways to detect fraud
• Fraud v Erroneous Claims
• Fraud Detection as a Predictive Modeling Problem
• Predicting rare events
  • Predictors
  • Stratified sampling
  • Stratified random sampling
  • Outliers
• Data mining
• Text mining
• Identifying fraud using time series analysis
• Fraud risk assessments

Detecting Fraud

• Further Statistical Analysis of accounting and other data
  • Grouping
  • Ordering
  • Correlation and regression analysis
  • Hypothesis testing
  • Further application of Benford’s Law
    • Chi Square and Kolmogorov Smirnoff Tests
    • Mean Absolute Deviation (MAD) test
    • Mantissa Arc Test
    • Second Order and Summation Tests