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How to analyse accounting fraud and ways to avoid them?


You might have heard about the ‘Enron Scandal’ that shook Wall Street to its core. Enron Corporation was an American energy company based in Texas’ Houston. The company was involved in duping the regulators by resorting to the off-the-books accounting practices and incorporating fake holding. Upon being publicised in October 2001, the Enron Corporation was declared bankruptcy and its accounting firm, Arthur Andersen, was effectively dissolved.

Enron was also cited as the biggest audit failure in the history of the world, at that time. Since then, Enron has become a well-known example of willful corporate fraud and corruption. The scandal brought into question the accounting practices and activities of many corporations in the world.

The Enron case drew attention to accounting and corporate fraud as its shareholders lost $74 billion in the four years. This led to the collapse of Enron Corporation and its workers lost billions in pension benefits. Thus, this case gave a lesson to the world to be ‘trade literate’ before investing your hard-earned money in the market.

The Association of Certified Fraud Examiners (ACFE) has defined accounting fraud as “deception or misinterpretation that an individual or entity makes knowing that these misinterpretations could result in some unauthorised benefit to the individual or the entity or some other party.” In simple terms, accounting fraud happens when a company alters the figures on its financial statements to make it appear more profitable than it is.

According to the ACFE, accounting fraud is the least common type of fraud in the corporate world. However, when it happens, it is the costliest type of crime. The FBI counts ‘accounting fraud’ among the significant threats that lead to white-collar crime.

Analysing accounting frauds and avoiding them

Having sound financial accounting knowledge helps you take calculated risks and well-informed decisions. With the help of Stock and Company Analysis, a market participant would better understand the opportunities that a business might present. Coupling these with technical analysis would be an application of data presentation and interpretation.

So, if you are looking to invest in today’s volatile market and avoid frauds for the longer term, then first develop the understanding of equity markets with an equity investing course.

What is the Equity Investing course? How does it help?

The Equity Investing course introduces you to various techniques used for valuing stocks and enhancing your understanding of the numerous factors responsible for the price of a share. The course will help you in identifying companies offering attractive investment opportunities in today’s uncertain trading environment. Deep knowledge of broader markets will allow you to make more informed investment decisions.

The Equity Investing course teaches you to analyse accounting fraud and offers ways to avoid them. Perception of detection is the secret to fraud prevention- this definition is the driving force behind most controls. Through this course, you will learn to detect frauds and methods to tackle them.

This programme alerts you from the con artists. It constantly makes you aware of the sellers who promise you high return rates or quick profits. Always remember that there is no such thing as a “no-risk investment”.

If you are interested in investing then first speak to your regular stockbroker, your solicitor, or some trusted advisor. Learn skills to save yourself from fraudsters by pursuing the Equity Investing course from reputed institutes of London.

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