The Meaning Of Accounting Fraud And The Ways To Discover It
When the accounting fraud is mentioned, it normally indicates that some intentional manipulation has been undertaken on a firm’s bookkeeping records. In a lot of instances, this is carried out for the purpose of painting a rosy picture of the financial performance of the business. Prominent examples of the areas that accounting may have taken place include the expenses under recording, revenues of sales that have been exaggerated, failure to divulge information regarding certain risky investments and falsifying the liquidity of a business through the consolidation of the debt that is short and long term.
One of the signs that accounting fraud is being perpetrated in your business is the sudden change of lifestyle by the people that are in charge of your finances. In most cases the lavish life that they are living cannot be supported by the pay that they are earning.
You will know that underground accounting fraud is happening in your organization if there is persistent same patterns when it comes to the figures. This is a common trend that has been discovered on many occasions by accounting forensics experts.
If you have allocated your company’s cheques signer the task of carrying out the reconciliation of the bank records that belong to your organization, the likelihood that accounting fraud is very high. You should consider undertaking the segregation of duties that are sensitive in nature as they might encourage fraud.
You should be wary of a member of staff in your organization that exhibits a personality that is intended to control others. As well such a person is likely to act in ways that you consider as secretive. In most cases you are going to find out that such a behavior is meant to conceal activities of accounting fraud that could be taking place.
The moment that you permit employees who are related to one another to be assigned the duties in your bookkeeping section , accounting fraud could be occurring there. The net effect of this is that the staff will be in a position to flout the existing controls as well colluding to commit the vice.
When your bookkeeper has the habit of being left behind in the office after hours, you should view that as a red flag for accounting fraud. You should be suspicious as well if the staff is carrying some of the work home. Before you assign the employees that will be in charge of your bookkeeping section, it is imperative that you carry out a comparison of the accountants so that you are sure that they are credible.