Financial-statement fraud involves the intentional misrepresentation of an entity’s reported financial position or results. Because these reports must be signed and certified, schemes of this type almost always require the authority to override internal controls and direct the accounting function—power that ordinarily rests with senior executives such as the CEO, CFO, or comparable officers. Empirical data in ACFE’s Report to the Nations show that a clear majority of financial-statement frauds are perpetrated by owners/executives, not by outside criminals or lower-level personnel.

A. Organized criminals rarely have the internal authority needed to manipulate an organization’s official financial statements.
B. Lower- or mid-level employees generally lack the access and authority to materially alter audited financial reports.
D. “All of the above” is incorrect because only senior management typically possesses the necessary control to commit financial-statement fraud.

1. ACFE Fraud Examiners Manual

2022 ed.

Part I

“Financial Statement Fraud

” §1.3

p. 1.303-1.304 – notes primary perpetrators are senior executives.

2. ACFE 2022 Report to the Nations on Occupational Fraud

pp. 48-50 – 54% of financial-statement frauds committed by owners/executives.

3. Wells

J.T. Principles of Fraud Examination

5th ed.

Wiley

2017

Ch. 11

pp. 342-343 – discusses executives’ ability to override controls to perpetrate financial-statement fraud.