Financial Impact of Accounting Fraud

Many of us whether accounting or non accounting background should at least understand the financial impact of accounting fraud as this nature of fraud are getting more and more prevalent.

 

Financial impact of accounting fraud:

Fraud losses will reduce net income $ for $ of a company: For example, if a company’s profit margin is 10%, so revenues must increase by 10x. Imagine that if losses due to fraud, say is $1 million hence the company needs to generate revenue of $1 Billion to recover same,

From studies, financial statement fraud often cause a dramatic decrease in market value of stock which might approximates 500 to 1,000 times the amount of the fraud