In what way can fraudsters conceal liabilities or expenses?

Fraudsters can conceal liabilities or expenses effectively by capitalizing costs that should be expensed. This approach allows them to manipulate financial statements in a way that misrepresents the company's financial health. When costs are capitalized, they are recorded as assets rather than expenses. This practice results in lower expenses in the current period, which artificially inflates profits. Furthermore, it defers the recognition of expenses to future periods when they are amortized or depreciated, making it difficult for stakeholders to assess the true financial situation in the present.

Accurate reporting of all transactions does not contribute to concealing liabilities; rather, it promotes transparency and accountability. Increased revenues, while potentially beneficial for a company, do not directly relate to the concealment of liabilities or expenses. Additionally, using cash transactions exclusively does not inherently conceal liabilities or expenses since those transactions must still be accurately recorded in the financial system. Therefore, the method of capitalizing improper costs is a key tactic used to obscure true financial obligations and mislead users of financial statements.