Discussion Topic: Financial Statement Fraud

Financial statement fraud can be classified into five categories:

1. Fictitious or overstated revenues
2. Understating liabilities or expenses
3. Timing differences
4. Improper valuation of assets
5. Failure to disclose contingent liabilities or related-party transactions

For each of the five categories, discuss how the fraud is accomplished, provide a specific example illustrating the fraud, and name two red flags that may indicate this type of fraud.