Manipulating financial statements

On Behalf of | Sep 27, 2022 | Blog, Fraud

Investors rely on financial statements to determine the value of their assets and for decision-making. Unfortunately, some reports sent to California investors are deliberately inaccurate and reflect fraudulent behavior.

Financial statements and fraud

Embezzlement could take many forms, ranging from short-changing customers at cash registers to diverting funds from corporate bank accounts to personal ones. No matter the scope of the embezzlement, such actions are illegal. To cover their tracks, some embezzlers may employ sophisticated plans. Altering financial statements could be among them.

Investors might find themselves the victims of financial statement fraud when dealing with an unethical broker. The statements could reflect hundreds of thousands of dollars in investments even though no money went to any investment vehicles. Another situation might involve money could be put into one investment vehicle while the statements reflect a different endeavor.

Financial statements indicating company profits or losses may undergo manipulation, as well. The investors might not sell their shares or redirect funds when managers lead investors into thinking a company earns more money than it does.

Legal matters related to financial statement fraud

Since it might be relatively easy to alter financial statements, this form of embezzlement could become rampant. Still, red flags may arise, leading to audits. Auditors might uncover discrepancies, leading to the discovery of improper activities. A subsequent criminal investigation might lead to charges.

That said, indications of embezzlement may turn out to be negligence upon closer inspection. In some situations, the accused might need to prove mistakes and errors caused the problems, not intentional fraud.

Other defenses, such as credible claims of false accusations, could undermine claims of intentional criminal activity. Ultimately, those falsely accused of embezzlement will have a chance to defend themselves.

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Gary Jay Kaufman
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