Fraudulent Financial Reporting
Accounting is one of the ethical dilemmas that management experts experience in their respective organizations. It involves providing a record that discloses the financial information of an organization and how the finances are managed. Obviously, some organizational stakeholders have malicious motives and they intend to interfere with the accounting records for their own self-interests. An accountant may face an ethical dilemma if the management intends to corrupt the company resources. As a result, the accountant will face pressure from the management to give a fraudulent financial report. In addition, the top management may force the accountant to help the organization in tax evasion by giving a false financial statement. Fraudulent financial reporting can occur when there is an omission of certain financial figures in the balance sheet, fraudulent asset valuation, or fictitious revenues that are not actually earned.
In an organization, the stakeholders include the shareholders, employees, customers, creditors, suppliers, public, community, potential investors, board of directors, the government, potential employees, and the debtors. The entire group of organization’s stakeholders is usually affected by any financial fraudulent act. A manager can curb any act of fraudulent financial reporting by keeping close attention to the financial records. Similarly, he can encourage the accountant to be a whistleblower and raise any suspicious fraud act by any stakeholder. This can be achieved by coining confidential channels that the accountant can use to air out grievances. Another method that can curb misleading financial reports is through external auditors. Auditors make a great impact in reducing fraud as they can identify any malicious activity in the financial records; in fact, external auditors are the best because the stakeholders cannot manipulate them.