Principles of Accounting SLP Essay Example | Topics and Well Written Essays - 500 words

Principles of Accounting SLP - Essay Example At the same time, the consistent communication will enlighten the employees on their effect of choices on the company’s future and on their future. Opportunities for misstatement and fraud exist upon every line item on balance sheet and income statement. Therefore, the finance managers should able to identify the ‘red flags’ and ask the right kind of questions. (Mabry, 2007) The two components of a balance sheet and/or income statement can be used as a â€Å"red flag† to alert of potential fraudulent activity are An in-depth analysis of the ratios of the financial statements can be used to detect the fraudulent activities of the company. A change in ratio over a period of time or over one year should be rational and logical that can be explained properly. Any unusual ratio jump or fluctuations or extreme deviations from the industry average that cannot be explained rationally need to be investigated. This is how the analysis of ratios can be used as a method of fraud detection. (Harrington, 2005) Mabry, B. and Toivonen, S. (2007) "Detecting Financial Statement Fraud: What Every Corporate Manager Needs to Know - Oil & Gas Financial Journal." Oil & Gas Financial Journal- Coverage of Oil and Gas Markets, Companies and Stocks.. Web. 26 Mar. 2011. . Harrington, C. (2005) "Association of Certified Fraud Examiners." Association of Certified Fraud Examiners - Fraud Training & Education. Web. 26 Mar. 2011.