Financial statement fraud happens is one of the most costly types of fraud. It is a significant problem because people inside and outside the company rely on the information provided in the financial statements. They assess the financial results and make predictions and decisions about the future of the company based on those results.
Upper management or company owners are the ones who are usually responsible for financial statement fraud. Executives are entrusted with entire companies. They have access to nearly all data and employees, and they can exploit this access to commit and conceal fraud.
The power the executive has by virtue of her or his position in the company is closely linked with the high cost of financial statement fraud. Power and access within a company make it possible for larger frauds to be committed and covered up.