Report on Financial Statement Fraud Scheme Case Study

Report on Financial avouchment Fraud Scheme compositors case Study The Importance of Timing ACC/556 Professor University of Phoenix December 19, 2011 memo To The Management From Forensic Auditor Date 12/19/2011 sphere Case Study on the Importance of Timing and Financial Statement Fraud Scheme As our confederacy is in process of conducting probe to detect any pecuniary pedagogy guile or ill-usage, I have come across the case where expenses were save in the pecuniary statement under the period it was disbursed to seller and existent services occurred in next or other financial course of instruction period.Its against the ruler of SEC and GAAP guidelines. In this particular case the repair were finished in current year and vendor was prepaid for services in full furthermost year financial period, which a violation by recording expenses in the wrong period. No one took the funds and excite fraud but it shows inaccurate expenses and revenue in financial statement for bo th current and past years. It was done to maintain the repair work out for last year as there was room to spend more than last year , so the plant supervisor and purchase director decided to pay in advance last year and actual services were occurred this year.As per scope of examination a caller can sustain a substantial amount of revenue through occupational fraud and abuse. There is several deterrence methods can be implemented by a company to avoid frauds and abuse by employees. This misleading financial statement fraud may impact our companys enthronement potential, credit worthiness, business operation, and employee morale (Wells, 2005). The SEC Acts of 1933 and 1934 were passed by Congress of unify States to provide sources of potential liability for accountants to correspond protection for investors and for facilitation of orderly slap-up markets (Lowers, Ramsey, Sinason &038 Strawser, 2007).These acts enforce accountability on accountants to practice integrity when working for thickenings and financial institutions by reporting misstatement disclosures in financial statements. As a rhetorical auditor I collect evidence from companys employees, customers, vendors, and unknown sources. The sampling tools and techniques used in this investigation lie downs systematic random weft of data from selected sources. The forensic accountant use computer forensics, data analytics and interviews to accommodate them to assemble much of the required evidence for an investigation.This abuse was detected when we appear the invoice of heavy amount paid by end of the last year without any inspection report or repair expiration document in file. The further investigation showed it was done later this year. No employee took any funds to commit financial fraud or thievery but the financial statement were misleading to the users of those statements. A company may experience such type of abuse or corruption schemes veritable at any given time, more than one bea or all over the company.Corruption can be performed by fraudster employees who intentionally and wrongfully use their influence to gain personal financial gain from company business transaction. It can be limited to a particular plane section or it may exist in all structural levels. It is full of life for a company to review financial status routinely to look into proper accounting and reporting procedures are followed in entirety of company business transactions. It is extremely important to review before an end of year transactions with heavy amounts to ensure validity of amount and services occurred in that financial year.There are many other red flags an investigator or auditor can find to detect such recording of expenses in wrong period. For example when there is an abnormal growth in offspring of days sales in receivable or spill in days purchases in accounts payable. These abnormalities and abuse can be avoided through reviewing acquisitions journal, world(a) b ook and accounts payable master file to ensure that there are no large or unusual amounts. besides review vendors invoices, receiving reports, purchase orders and purchase requisitions to rely that they are valid and are for reasonable amounts.Trace inventory acquisitions to the inventory master file to verify that items record as inventory are all valid. Trace receiving reports and vendors invoices to the acquisitions journal to verify that all acquire goods have been properly record. Compare transactions recorded in the acquisitions journal to the vendors invoices, receiving reports, purchase orders, and purchase requisitions to verify that they have been recorded at their correct amounts, date, and quantities.Other factors that aided in this investigation are from checking cash, and outlay journal entries to be dated with the date of the check. The related monthly general ledger summary entries shall carry the date of the month summarized. Procedures that need to be implement ed to ensure that fraudulent processing of vendor invoices does not exists would consist of Only original invoices being processed for payment Proper allowance obtained for price differences on invoices Proper authorization obtained for quantity differences on invoices Invoices received from authorized vendors Check stock should have pre-printed sequential numbers and logged in a register Separation of duty for printing and mailing of vendor checks Separation of duty for computer vendor masters leaning and updates Ensure merchandise is properly delivered to a company facility. Reviewing general ledger entries for unusual amount and date of the year.The substantive procedures to test effectiveness of inner controls for recording expense is to examine accounting records, reports, documents, control related activities, and client procedures. The implementation of above mentioned procedures will decrease the risk of fraud and abuse in an organization. References Wells, J. T. ( 2005). Principles of Fraud Examination. Hoboken, NJ McGraw-Hill. Mulford, C. W. , &038 Comiskey, E. E. (2002). The Financial Numbers Game. Hoboken, NJ jakes Wiley &038 Sons, Inc.