Revenue recognition fraud seems to be on the wane, according to a report by the Deloitte Forensic Center.
While it was the most common financial statement fraud scheme alleged by the SEC in its accounting and auditing enforcement releases from 2000 through 2008, representing 38 percent of alleged financial statement fraud schemes, the number of such schemes has declined in all but one year since 2003. Revenue recognition fraud represented 30 percent of such schemes in 2008, down from 33 percent in 2007.
Improper disclosures (18 percent) and manipulation of expenses (16 percent) were the other top schemes, which increased in prevalence from 2007 to 2008. In 2007 they represented 13 percent and 12 percent, respectively, of financial statement fraud schemes alleged by the SEC.
Not surprisingly, chief financial officers, chief accounting officers, controllers and chief executive officers were the executives most often named in fraud cases filed by the SEC, according to the report.
CFOs, CAOs and controllers collectively represented 44 percent of the individuals alleged by the Securities and Exchange Commission to have committed financial statement fraud in 2008. The report did not provide separate figures for the three positions, however. CEOs represented 24 percent of the executives cited, while directors and general counsel were each identified as subjects in 4 percent of the enforcement releases. Other members of management represented 24 percent of the executives charged.
In 2008 technology, media and telecommunications (30 percent) and consumer business (29 percent) had the greatest proportion of financial statement fraud schemes alleged by the SEC, followed by financial services (18 percent) and life sciences and health care (12 percent).
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