Not a Financial Exec?

Jan. 13, 2010
SEC may still cite you in fraud allegations.

You may not be the company chief financial officer or chief accounting officer, but don't think those titles are the only ones the Securities and Exchange Commission cites when it comes to fraud allegations. According to the Deloitte Forensic Center, while CFOs, CAOs and controllers accounted for 44% of the individuals alleged by the SEC to have committed financial statement fraud in 2008, CEOs were cited 24% of the time.

Which leaves 32% of the individuals unaccounted for. "Nearly one third of the individuals named in the SEC's enforcement releases alleging financial statement fraud in 2008 were not CEOs or financial executives," says Toby Bishop, director of the Deloitte Forensic Center. "They were directors, general counsel or members of management involved in functions such as sales, operations and planning. This shows that it's not only financial executives who could benefit from an awareness of fraud risks in their organizations, so they can take steps to avoid or reduce them."

Deloitte's conclusions come courtesy of its third annual study of SEC Accounting and Auditing Enforcement Releases, titled "Ten Things About Financial Statement Fraud."

Manufacturing is well represented in alleged fraud schemes committed from 2000 to 2008, according to the Deloitte study. It came in a distant third in terms of numbers, with 140. This compares with 550 by the technology, media and telecommunications industry and 438 by consumer businesses (which includes consumer products firms).

Revenue recognition fraud was the leading type of financial statement fraud perpetrated during the 2000-to-2008 time frame.

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