Ten Things About Financial Statement Fraud
A review of SEC enforcement releases, 2000–2006
Despite increasingly stringent legislation aimed at combating fraud, such as the Foreign Corrupt Practices Act and the Sarbanes-Oxley Act – and despite increased enforcement efforts by the Securities and Exchange Commission (SEC) – financial statement fraud remains a public concern.
Just what types of fraud is the SEC describing in its enforcement actions? In what industries are frauds most prevalent? Have fraud types and industry patterns changed over time?
To address these questions, and to learn how fraud schemes have evolved since the Committee of Sponsoring Organizations of the Treadway Commission produced its last comprehensive report on fraud in 1999, the Deloitte Forensic Center has, in 2007, completed an analysis of hundreds of SEC enforcement releases issued from 2000 through 2006.
The paper attached below provides snapshots of the data collected from the SEC’s enforcement releases relating to frauds allegedly committed by companies, officers and employees. It reports the number of frauds by industry, and types, and comments on the trends emerging in this millennium.
The Deloitte Forensic Center will, in the future, update the study annually to provide longer views of trends, and to broaden coverage by including restatements and securities litigation in the analysis.
The findings may have significance for the global effort to develop more robust business processes for managing the risk of fraud. The efficacy of such processes will depend on knowing the fraud schemes typically committed and industry-by-industry differences in those schemes.
Download the complete report below.