Beginning with coverage of the environment in which financial statement fraud occurs, students will proceed to learn how to use financial statements and other disclosures for the purpose of assessing the quality of financial reporting and identifying potential signals of manipulation. Students will then proceed to cover more complex issues, including business combinations, executive compensation and employee benefits, and the use and misuse of derivatives and special-purpose entities.
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Upon successful completion, the student will be able to:
Explain the use and importance of the information that may be found in financial reports and other information sources, in detecting financial statement fraud.
Evaluate a comprehensive financial report (including financial statements) to determine whether it reflects the characteristics that distinguish low-quality from high-quality earnings.
Develop an earnings-management detection strategy.
Analyze a balance sheet using horizontal, vertical, and ratio analysis, as well as by applying detailed analysis to line-items for the purpose of detecting manipulation of assets, liabilities, and earnings management.
Analyze an income statement, using high-level and detailed approaches, for evidence of misstatement of revenues and/or expenses.
Analyze cash flow statements for the purpose of detecting misstatements and miscategorizations.
Analyze a set of financial statements, using discriminant models such as the Beneish M-score and the Altman Z-scores, to determine whether there are indicators of earnings manipulation or other misrepresentation.
Compare and contrast alternative measures of profitability and of cash flow, with emphasis on the relative quality of information that each conveys.
Scrutinize financial reports for indicators of fraudulent reporting by analysis of trend, norm, and quarterly data.
Evaluate the likelihood of earnings management or other financial statement manipulation in situations involving business combinations, segmented reporting, employee compensation and benefits, derivatives, and special-purpose entities.
Effective as of Winter 2007
FSCT 8491 is offered as a part of the following programs:
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