Common financial fraud known to public are mostly cash theft related. However, recently, an issue was raised on fraud that mostly caused by financial reporting misstatement. Financial reports are very important in all business firms. These are used as guide in providing economic decisions. A false report will cause a crucial mistake in making economic decisions. And false reports can convince investors to venture in fraudulent business activities. Most businessmen rely basically on financial performance of a company. If a company is projected to be earning well when in fact it is not, it may lead investors to lose than earn. Most misstatement are caused by projecting higher revenues. Revenue recognition standards and principles are sometimes used to misstate financial reports. Determining and defining appropriate revenue recognition has been a primary concern of companies, and accountants. Improper revenue recognition has been one of the leading causes of financial statement restatements. One of these issues is the use of Accrual Accounting. There was a debate regarding how revenue be recognized. Cash Basis or Accrual? Well, per reference to our generally accepted accounting principle, the accrual basis is more acceptable rule than the cash basis. The use of accrual method is not fraudulent actually. Its abuse use of this rule that cause some fraud in financial reporting. Some companies use accrual basis as defense in projecting higher income. This conflict is already been an issue for most investors since investors are not well versed with the value and essence of accrual basis. In their mind, any income reported is cash. And most of the time if lets say you reported an income of P 20,000,000, they would expect that there’s P20,000,000 cash. But that’s not how it is. In accounting, net income is not necessary cash. There are items that are noncash that form part of the net income element. However, the issue on use of Accrual to create financial fraud is simply misrepresentation of reports. The purpose is simply to project higher income for the company to welcome investors. But let us be reminded that there is limitation in the use of accrual basis. Any abuse use of this principle can obviously be traced.