Forensics Journal - Stevenson University 2015 | Page 12

STEVENSON UNIVERSITY

consolidate SPE in which it has a controlling interest (American
Institute of Certified Public Accountants, 2009).

Partnoy, F., & Turner, L. E. (2010). Make markets be markets.
Retrieved from http://www.rooseveltinstitute.org

Off-balance-sheet financing does create financial reporting
discrepancies due to existing loopholes in accounting regulations,
which prevent creditors and investors from obtaining a corporation’s
true financial profile. Corporations view off-balance-sheet financing
as an accounting tool used to reflect a lower debt level and hedge risk.
However, off-balance-sheet financing is perceived by creditors and
investors as a practice and a detriment because it affects the financial
reporting integrity. The FASB and SEC should disallow off-balancesheet financing, and require corporations to accurately report all of
debt on the balance sheet.

Trainer, D. (2010). Off-balance-sheet debt: Bad enough
that FASB notices, maybe you should too?
Retrieved from http://www.forbes.com
US Securities and Exchange Commission. (2005). Report and
recommendations pursuant to section 401(c) of the Sarbanes-Oxley
act of 2002 on arrangements with off-balance-sheet implications,
special purpose entities, and transparency of filing by issuers.
Retrieved from http://www.sec.gov
Weil, J. (2004, September 22). How leases play a shadowy
role in accounting. Retrieved October 10, 2013, from
http://analystreports.som.yale.edu/internal/Professional%20
Reports/WSJ_com%20-%20How%20Leases%20Play%20A%20
Shadowy%20Role%20In%20Accounting.ht

Off-balance-sheet financing is not a trick of the trade – it is fraud.
Off-balance-sheet financing has existed for almost a century, thus
transparency is hampered within the financial industry. Off-balancesheet financing must be eliminated, and regulations revised to
encourage integrity and allow sound financial decisions by financial
statement readers.

CRYSTAL ABRAHAM
C
 rystal Abraham is a Graduate Student
at Stevenson University focusing on
Accounting in the Forensic Studies master’s
degree program. Ms. Abraham has 16 years
of experience in the financial industry, and
is currently employed as an Auditor by the
Defense Contract Audit Agency. Ms. Abraham
holds a Bachelor of Science in Accounting
from the University of Baltimore.

REFERENCES
American Institute of Certified Public Accountants. (2009).
FASB issues standards on securitizations, SPEs.
Retrieved from http://journalofaccountancy.com
Bahnson, P. R., & Miller, P. B.W. (2010). Off-balance-sheet
financing: Holy grail or holy pail?
Retrieved from http://www.accountingtoday.com
Financial Accounting Standards Board. (1976). Statement of
financial accounting standard no. 13 (Publication No. 13).
Norwalk, CT: Author.
Ketz, E. J. (2003). Hidden financial risk: Understanding off-balancesheet accounting. Hoboken, NJ: John Wiley & Sons.
Lander, G. H., & Auger, K. A. (2008). The need for transparency:
Implications of off-balance-sheet financing and inferences for the
future. Retrieved from
http://www.emeraldgrouppublishing.com/products/journals/
McLean, B., & Elkind, P. (2004). The smartest guys in the room:
The amazing rise and scandalous fall of Enron. New York, NY:
Penguin Group.
Mulford, C. W., & Comiskey, E. E. (2002). The financial numbers
game: Detecting creative accounting practices. New York, NY: John
Wiley & Sons.

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