A 2010 study on fraudulent financial reporting by COSO notes ways in which long-lived assets can be fraudulently over- stated, including:
● Fictitious assets on the books (WorldCom)
● Improper and incomplete depreciation (Waste Management)
● Failure to record impairment of assets, especially goodwill (Sun
Microsystems)
● Expired or worthless assets left on a company’s books
(Millacron)
● Assets overvalued upon acquisition, especially in the purchase of a company (WorldCom)
a. What might motivate management to overstate fixed assets?
b. What other factors should the auditor consider when assessing fraud risk related to long-lived assets?
