What accounting approaches could be used to compute the value of damages of the impact of...

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Accounting

What accounting approaches could be used to compute the value ofdamages of the impact of the alleged fraud in a case similar toEnron?

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Accounting Approaches May be use to compute the of dameges of the impact of the alleded fraud in a case similar to Enron Fraud Losses A fraud loss occurs when a party loses money or other property to another party through false means This could be as simple as a misrepresentation of facts or as complicated as an international financial scheme Normally accountants become involved as expert witnesses in fraud cases in two ways First they may help gather evidence to prove that a fraud did indeed take place Second they may calculate how much money should be awarded to the victims of the fraud the fraud damages The authority that dictates how to calculate fraud damages depending upon the circumstances could be common law court rulings statutory written laws passed by a legislature or contractual eg insurance policies This discussion will concentrate on losses under commonlaw fraud damages assessment Governing Theory Depending on the applicable state law two theories have been used in assessing fraud damages the benefitofthebargain rule and the outof pocketloss rule The following example shows how the two theories operate The defendant sold the plaintiff a property with an alleged value of 100000 for 92500 when in essence the property only had a market value of 80000 The fraud damages under the benefitofthebargain rule will be calculated as 20000the difference between the misrepresented value 100000 and the actual value received by the defrauded plaintiff 80000 On the See Answer

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