As an accountant or bookkeeper we have all experienced a client (or another professional) handing us a set of financials which just don't add up.

There are three primary reasons why someone manipulates financial statements. First, in many cases, they have a direct incentive to paint a particular picture of the financial condition.

Second, it is a relatively easy thing to do. The Financial Accounting Standards Board (FASB), which sets the GAAP standards, provides a significant amount of latitude and interpretation in accounting provisions and methods. For better or worse, these GAAP standards afford a significant amount of flexibility, making it feasible for corporate management to paint a particular picture of the financial condition of the company.

Third, it is unlikely that financial manipulation will be detected.

So when we come across this from a client or another financial professional how do we deal with this?

We discuss this in this episode of The Bookie & The The Beano.

Diane (The Bookie aka Bookkeeper) from https://www.directmanagement.com.au and Kane (The Beano aka Accountant) from www.activeoutsourcing.com.au and www.accountancyonline.com.au are professionals practicing who encounter these issues and many more every day.