Lecture Notes: How to Find Financial Statement Fraud

Introduction

• Presenter: David Malumad
• Title: Forensic Accountant, Fraud Investigation Expert
• Experience: 20+ years
• Topic: Finding financial statement fraud

Key Concepts

• Financial Statement Fraud
  • Requires analyzing journal entries and registers
  • Look for anomalies outside the norm
  • Identify outliers and investigate underlying support/evidence
• Investigative Approach
  • Start with vendor master list and accounts payable register
  • Sort data alphabetically and by invoice number
  • Conduct various tests to identify red flags

Vendor Master List Analysis

• Steps:
  1. Alphabetize vendor names
  2. Look for similar vendor names (e.g., Amazon vs. AMZN)
     • Red Flag: Similar names can indicate potential fraud
  3. Check for peculiarities like PO Box addresses
     • Red Flag: Businesses rarely use PO Boxes
  4. Use tools like Google Satellite for address verification
     • Red Flag: Residential addresses for businesses

Detailed Vendor Investigation

• Highlight unusual names and incomplete information
• Example: