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Misrepresentation of financial statements: An accounting fraud case from Turkey

Cenap Ilter (School of Business-Accounting, Grant MacEwan University, Edmonton, Canada)

Journal of Financial Crime

ISSN: 1359-0790

Article publication date: 29 April 2014

3468

Abstract

Purpose

The purpose of this paper is to show the public, in general, and auditors, in particular, that in the absence of control there is always a risk of fraud. Fraud can be done in various forms. Larceny may be the most obvious case of fraud, but fraud may be done in many other ways too. Balance sheet fraud or financial statements fraud is a broader issue; it is far-fetched than a few hundred dollars of a larceny case. In financial statement fraud, the deep down effect may be millions or billions of dollars.

Design/methodology/approach

The paper has been designed based on a fraud theory. The author has observed the implications of a possible fraud in a real audit case. The fraud theory has been tested through financial analysis and audit tests. The theory has then been revised and the existence of a financial statement fraud has been proven.

Findings

The paper explores that banks and group companies controlled by unreliable owners can lead to misuse of public's funds in accordance with the directives of the owner. Public's money can be transferred to other group companies in an illegal manner – in excessive amounts – and never returned to the bank by means of applying different accounting fraud techniques.

Research limitations/implications

Auditors, who may audit group companies that include a bank or banks with deposit receiving and lending rights, should pay attention to the transactions between the group's bank and the other group companies. The lending may be excessive in amount and/or never paid back and the financial statements would be misrepresented covering various fraud schemes.

Originality/value

The case that the paper deals with reflects the author's own audit experiences. The names of the companies have been changed but not the essence of the events. From this perspective, it sheds light onto the path of an auditor who happens to be in a similar situation.

Keywords

Citation

Ilter, C. (2014), "Misrepresentation of financial statements: An accounting fraud case from Turkey", Journal of Financial Crime, Vol. 21 No. 2, pp. 215-225. https://doi.org/10.1108/JFC-04-2013-0028

Publisher

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Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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