Financial statements and documents can be vital when running a business, providing essential information about how operations are doing. These papers could go through your desk without much trouble, but sometimes, they can serve as warnings of fraudulent activities.
Whether it is you, your business partner or a trusted executive, they can become vulnerable to legal issues if they commit financial statement fraud. In some cases, they might not even realize their actions are unethical. Knowing what these practices look like should be a priority, including the following:
- Revenue numbers that seem to be increasing without reflecting in actual cash flow monitored by accounting
- Unusually healthy sales records when all other organizations in the same industry are not having similar success
- Astronomical fiscal year performance results that happened suddenly during the final stages of reporting
- Lax checking practices when it comes to financials within the company
- An unreasonable number of transactions involving vendors or suppliers that seem unnecessary
- Holes in financial paperwork and inconsistent auditing practices
The size and conditions of bonuses could also motivate people to commit fraud for monetary gain. If one or more of these activities exist in a company, an investigation could be worth the trouble, helping reveal and rectify issues before they become worse.
Knowing how to approach litigation
Tackling these problems in court could be a last resort, but it may be unavoidable in some scenarios. It can be scary when the business and your reputation are on the line. With so much at stake, consider seeking professional guidance before taking legal action. It might not guarantee favorable results, but it might help you understand the best approach depending on the circumstances.
