It’s an ugly fact, but a fraud that hides corporate underperformance, embezzlement, or other financial malfeasance on the part of executives and company officers is a real risk for investors and traders. This kind of financial fraud based on financial statements can take many forms, but most commonly it manifests as overinflated income numbers that count potential sales, inflated asset values, or the omission of key obligations and liabilities from the statement. Spotting these misleading elements in financial statements can be difficult, but one key red flag is the presence of growing revenues or profits without corresponding increases in cash flow. The right risk management advice can help you spot the other signs.
Protecting Yourself From Financial Statement Fraud
If you never master the art of detecting these anomalies, you’re not alone. Typically, the discovery will be made by your accountant or another financial professional you employ to help audit financial statements for your company, or for companies you invest in. This kind of help is essential to double-checking the published numbers you receive from other professionals. That’s not the only step to managing your risk, though. you also need the right protection in the form of financial fraud insurance, bonds that protect you or your investors, and other risk transfer products that provide financial resources to help you recover if you are the victim of statement fraud. Get that help today to round out your risk management planning.