Question

Try to find and name financial statement fraud cases in which nonfinancial measures were critical in exposing the fraud.

Answer 1

Financial statement fraud cases in which nonfinancial measures were critical in exposing the fraud include Enron, WorldCom, and Tyco International.

Step-by-step explanation:

Financial statement fraud cases in which nonfinancial measures were critical in exposing the fraud include:

1. The Enron scandal: Enron manipulated its financial statements to conceal their true financial condition. The company used off-balance-sheet entities and complex derivative transactions to artificially inflate their revenues and hide their debts. Nonfinancial measures, such as actual energy production and consumption data, were crucial in exposing the discrepancies between Enron's reported financial performance and their actual operations.
2. WorldCom fraud: WorldCom inflated its earnings by falsely categorizing routine expenses as capital expenditures. Nonfinancial measures, such as the actual number of subscribers and revenue generated from specific product lines, helped uncover the fraudulent accounting practices.
3. Tyco International scandal: Tyco's former CEO, Dennis Kozlowski, and CFO, Mark Swartz, engaged in financial statement fraud by looting the company's funds for personal gain. Nonfinancial measures, such as excessive spending on luxury items, were critical in exposing the fraudulent activities.

These cases demonstrate the importance of examining nonfinancial measures alongside financial statements to identify inconsistencies or irregularities that may indicate fraud.