The Meaning Of Accounting Fraud And The Ways To Discover It
When there is evidence that the bookkeeping information have been tampered with in a deliberate manner in a company, that points to the existence of accounting fraud. In many of the cases, this action is driven by the intention of depicting a company that has a better financial performance than the situation on the ground. You will tell that you are looking at a case of the accounting fraud if you notice that either the liquidity have been made to appear healthier than it really is via the merging of the liabilities both short and long term, sales revenues that have been misstated, expenses that are underrecorded or the presence of accounting practices that are creative.
One of the red flags that will indicate to you that accounting fraud could be occurring in your firm is unusual lifestyle change in the people that you have entrusted with your financial activities. You will find that the staff are in opulent lifestyles that cannot be sustained by the level of earnings that they are getting.
In the event that the figures in your finances are having a certain pattern, this could be a clear indication that accounting fraud is being undertaken by your staff. When specialists are performing the forensic accounting, this is a misnomer that they encounter all the time.
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. It is highly advisable to separate activities such as these as they conducive to the commission of the fraud.
In the event that one of your employees is being viewed as one that has a controlling disposition, it is a valid reason to be suspicious. Additionally, such a staff may appear to operate in a secretive manner. In majority of the instances the behavior is a clear red flag that the likelihood of accounting being carried out in your business is high.
When you allow employees that are related to work in your accounting segment, accounting fraud could be taking place. The resultant effect of this scenario is that the employees will not only engage in collusion but are better placed to circumvent the regulations that have been put in place.
In the event that you notice that your accountant is often working after hours, you should be wary as accounting fraud could be in the offing. You should be suspicious as well if the staff is carrying some of the work home. When you are hiring the staff for your finance department, it is advisable to compare accountants to ensure that they have integrity.