Where is Fraud Likely? - Part 12

Cooking the Books isn’t What Julia Child was Doing

Cooking the books is fraud used to falsify the company’s financial statements.  It is often used to improve the earnings of a company by recording revenues that are either nonexistent or have not been earned by year end.  In recent years, several Fortune 500 companies have cooked their books to improve their financial figures.  Enron and WorldCom are among those accused of cooking their books.  To help prevent this type of fraud, the external auditors of a company should carefully examine significant transactions close to the end of the year to ensure that questionable transactions are not being booked close to the end of the year.  Anyone associated with the entity should also ask the question – Do I understand how and why the company is recording its revenue?  If that question cannot be answered satisfactorily, there may be someone cooking the books.

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