An observer (internal auditor) in a company called his former university professor and told him that executives in his company provided the local bank with forged financial statements. And he asked for his help what would he do.
The CFO, CEO and Assistant Chief Operating Officer met with representatives of the bank to fund the company. One of the goals of the meeting was to provide the representatives with quarterly financial statements. The company suffers from a shortage of liquidity and the bank has stopped funding until it gets the latest financial results for the company.
Executives prepared financial statements that included inflated sales and receivables. The internal auditor refused to sign. Inform them that this is fraud. They tried to convince him that he should sign the paper, as it is the only way to obtain financing. And they asked the internal auditor to give up ideals and live in an ivory tower that has its human capital on the real world. The executives did not have a strong background in accounting. However, the internal auditor realized that there are fake operations where the goods have not been sold and the customers have not received the goods and at the same time do not comply with the accounting norms. They requested that no one be informed of this, but the employee informed the auditor of that. The CEO asked to write dummy entries
The internal and external auditors have not audited the quarterly lists before. The professor asked the internal auditor whether fraud occurred for the first time or happened previously! But the internal auditor said the company faced a loss during the first quarter
It appears that the bank has stopped financing the company in exchange for checks. But what happened after the company provided the bank with forged lists was that the bank agreed to finance them. The internal auditor mentioned that he had previously signed the commitment letter with the bank, but that was about the past year, but this year he refused to sign. Also, one of the accountants resigned in light of this. An internal auditor asked his professor for advice, so what should be done !!!!!!!!!!

After discussing this case we can
* Estimating the real pressures to meet the financial projections.

* Distinguish falsification of the financial statement from brutal accounting.

* Statement of alternative reactions when facing financial statements fraud (suspected)