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Forensic Accounting, Forensic Techniques, and Fraud Detection Copyrighted 2001 D. Larry Crumbley, ... - page 209 / 352

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© D.L. Crumbley

The double entry method of accounting possesses a peculiar elegance; results of operations are presented from two differing points of view – an income statement, presenting results over time, from period A through period B; the second point-of-view presented is always a balance sheet, which is nothing more than a “Kodak moment,” simple snapshot of things remaining on hand at the end of period B.

Part of the perverse and peculiar elegance of the double-entry system is that distortion of one point-of-view requires distortion in the other. Sooner or later, the distortion of a balance sheet, that Kodak snapshot, becomes visible to the naked eye. The distortion becomes discernable through various tests and measures – and audit procedures.

In other words, you can put off the inevitable, but only for so long. Six months. A year maybe. In really egregious situations, perhaps longer. If there are many parties in collusion, or if the fraud is very complex, perhaps it can be put off far longer. In time, though, the balance sheet puffery bursts of its own accord.

Even a tick can swell only so far.

Source: Joe Anastasi, The New Forensics, John Wiley & Sons, 2003, p. 91

The Magic of the Double Entry System

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