CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
The web star dictionary defines fraud as “an intentional deception to cause a person to give up property or lawful right, which could also mean deceit, trickery or cheating. According to statement of internal audit standard No2 of the Institute of Internal Auditors, USA, fraud is defined as an array of irregularities or legal acts characterized by international deception. The world of financial statements fraud needs no introduction. The practice of manipulating the financial statements of companies to bolster their position is act new but got to a height in Enron and world.com saga (Razace.2002). According to the Association of Certified Fraud Examiners (ACFE), financial statement fraud is the deliberate misrepresentation of the financial condition of an enterprise accomplished through the intentional omission mount in the financial statement of organization to deceive financial statements users. It caused the accounting firm a very big embarrassment and saw the demise of the world leading accounting firm, Author Anderson (AA) (Isaac, 2008.2).
The current business environment, have pushed the top of many companies and organization with paying attention to how to make the financial statement look better in order to attract investors or paint a good picture of their companies, using aggressive accounting (Anumaka; 2007:1) Fraud is classified into two categories:* Fraud involving the manipulation of the records and accounts* Fraud usually by employees involving the the, un-appropriation or embezzlement of companies funds in the form of cash or its other assets usually by junior staffs. Apart from the problem of scarce resource, organization run the typical risk of fraud and errors even more problems solution to fraud is not sought far. In this project work, problems of financial statement fraud will be extensively assessed with its solution in relation to organization.
STATEMENT OF THE PROBLEM
The current business environment and even more economic recession, have in recent times pushed the top management of many organization into paying attention to how to make financial statements of their companies look better in order to attract investors by manipulating figures in their financial statement either by increasing or decreasing the figures depending on what they want to achieve at the moment using aggressive or creative accounting otherwise known as financial statement fraud (Anumak, 2007).In recent times, fraud has been discovered to pose a big threat on organizations. It is a big business risk which can incur a very big cost leading to a lot of problems of which one of the problems is loss of confidence of shareholders and the public on the company. This research work tries to solution to financial statement fraud. Another area on which the research work will focus on “is auditor involvement in solving fraud problems. We will also look into corporate governance as a tool in fraud prevention cost of fraud will be discussed too.Fraud is a very big business risk which if not prevent will have a very big negative impact on organizational performance.
