Manipulation of Financial Statements

Manipulation of Financial Statements Response

Initial Post Response

If the controller asked me to misclassify inventory as fixed assets, I would be motivated to speak since this may be a fraudulent act on the part of the company. This is because it will be intended to change the financial implication of the company in the long run since inventory should be treated as short-term assets, thus impacting the current ratio of the entity. Moreover, I would be motivated to speak since the controller would be willing to test my level of integrity and understanding of the classification of assets and the accounting principles behind the classification (Kanapickienė, & Grundienė, 2015). Therefore, if I do it without raising an alarm, he may use it to punish me in the future. I would be hesitant not to speak due to fear of reprimand. The reprimand by the controller may result in a delay in promotion when due, despite meeting all the requirements. More so, it may result in demotion or dismissal for insubordination with various claims leveled against me. My decision to stay silent or speak will make a lot of difference despite the request to misclassify the inventory as fixed assets being a one-time event from the controller. By speaking, I will prevent fraud from taking place under my watch and earn the trust of the controller. If I remain silent, I will impress him but allow future fraud to be committed through me.

Response to Erica Green

Hello Erica Green. I agree with your observation that according to Ramos, & Lyons (1997), the National Commission on Fraudulent Financial reporting recognized that fraud and its adverse effects should be viewed as the responsibility of all the parties involved in the scheme. Hence you are obliged to speak since the onus to stop it lies with every person on the fraud trail. Moreover, the fear of losing a job will make you remain silent.

Reference

Kanapickienė, R., & Grundienė, Ž. (2015). The model of fraud detection in financial statements by means of financial ratios. Procedia-Social and Behavioral Sciences, 213, 321-327.

Ramos, J., Lyons. A., (1997). Considering Fraud in a financial statement audit, practical guide for applying SAS no. 82, 1997. American Institute of Certified Public Accountants.

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