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Financial Fraud

Accounting fraud involves an attempt by insiders at a company to manipulate the company's financial results to achieve an objective. The most common techniques used to manipulate the company's financial results include accelerating or deferring revenue or expenses. For example, in the WorldCom scandal of 2002, one of the techniques used was to “capitalize” expenses. In this process, expenses that should have been recorded in one accounting period were instead spread over many accounting periods, resulting in better performance of the company in the short run. Companies may attempt to do the reverse as well. In an accounting period when performance is particularly good, they may record additional expenses or defer revenue in order to improve performance during a later accounting period, when those expenses ...

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