Techniques used to Prevent and Detect Fraudulent Financial Reporting: An Aspect of Financial Statement Misrepresentations

Abstract

Techniques used to detect and prevent fraudulent reporting of financial statements are very important in the effective operation of any company. The aim of this paper is to assess the aspect of financial statement misrepresentations and how we can apply the techniques to detect and prevent fraudulent reporting of financial statements. This paper opted for a for a qualitative research approach. This study used different research books (6) as a source of the data (documentary reviews as the tool of data collection). The study found that techniques to detect and prevent fraudulent reporting of financial statements are very crucial in aspects of financial statement misrepresentations. Also, the study observed that techniques used to detect and prevent fraudulent reporting of financial statements are liabilities versus assets, cost of goods sold versus sales, accounts receivable versus sales, gross, inventory a company’s inventory, operating versus sales, net profit margins, and analytical procedures for fraud examiners. The study concluded that the techniques used to detect and prevent fraudulent reporting of financial statements are very imperative to enhance the operation of the organization. The study recommended that the fraud inspectors should apply the ratios to examine debtors for possible larceny schemes. Buying and getting inventory structures can upset the ratios. Minimizing the COGS consequences in a rise in the ratios as well. Significant changes in the inventory turnover ratio are good signs of likely fraudulent inventory action. Also the management should commit to aiding all employees in building internal control systems through interaction and training in order to educate them on issues surrounding the effective application of accounting laws and processes, thereby enhancing their professional skills and competence. There is a need to take legal action against those who misuse local government funds, and recovery must be obtained. This study looked at how internal control systems affect the performance of Tanzanian local government authorities. The paper calls for greater research into the problems of building organizational internal control systems, as well as the impact of information and communication technologies on these systems. The effects of information and communication technology on internal control systems.

Keywords: Fraudulent Financial Reporting, Financial Statement, Misrepresentation