Analysis of Fraud

I. Background

a. What is accounting and what role does financial reporting serve?

Accounting is often referred to as the language of business because it facilitates the communication of the financial position of a company in an easily comparable way that various users can understand. In simple terms, accounting involves setting up, maintaining, and reviewing the accounting records of a company in order to properly understand its financial position. There are many users, both internal and external, of the accounting records of an entity. Internal users typically refer to management, while external users refers to investors and lenders. Due to these various users, it is very important that the financial reporting provides a fair representation of the financial position of the company and that the company is disclosing all important financial information they are required to. Without strict oversight and regulations, stakeholders of public companies are susceptible to great risk. As stated in Objective 2 of FASB Concept