The fraudulent investor: an accounting investigation on a Venetian manufactory, 1778-1784.

The chapter analyzes the particular workings of an accounting fraud that emerges from the financial statements prepared by Geminiano Cozzi’s porcelain factory, an enterprise active in Venice in the second half of the 18th Century. The fraud in question took place in the years 1781, 1782 and 1783. The three financial statements analyzed in the present chapter were formally prepared by a government official (the Inquisitorato alle Arti), but the accounting information was provided by an accountant who was appointed by the principal investor. The company was facing a lack of liquidity, but it was paying high dividends to the investor. For this reason, the Inquisitorato alle Arti began to suspect tampering with the accounts and required the preparation of the three investigated financial statements. At that time, there was no well-established process for detecting accounting fraud: the chapter examines both the procedure and the report (called “Riflessioni”, Stazzi, 1981) resulting from the investigation conducted by the Inquisitorato alle Arti into the accounting fraud at Geminiano Cozzi’s factory.