Report on Financial Statement Fraud Scheme Case Study

Report on monetary Statement Fraud synopsis Case Study The Importance of Timing ACC/556 Professor University of Phoenix declination 19, 2011 Memo To The Management From Forensic Auditor Date 12/19/2011 Subject Case Study on the Importance of Timing and Financial Statement Fraud Scheme As our high society is in help of conducting investigation to detect any fiscal statement mockery or abuse, I bear come across the case where expenses were recorded in the financial statement under the period it was disbursed to v wipeoutor and actual function occurred in next or other financial family period.Its a havest the regulation of SEC and GAAP guidelines. In this special(prenominal) case the indemnify were completed in current year and v give the sackor was prepaid for run in full last year financial period, which a invasion by written text expenses in the wrong period. No one took the cash and commit fraud but it shows inaccurate expenses and revenue in financial statement for b oth current and past years. It was done to maintain the sterilize budget for last year as there was room to slip by more last year , so the plant supervisor and barter for manager decided to pay in advance last year and actual service were occurred this year.As per scope of examination a company great deal lose a substantial amount of revenue through occupational fraud and abuse. There is several deterrence methods stern be employ by a company to avoid frauds and abuse by employees. This misdirect financial statement fraud may impact our companys investment potential, credit worthiness, business operation, and employee morale (Wells, 2005). The SEC Acts of 1933 and 1934 were passed by copulation of United States to provide sources of potential liability for accountants to ensure protection for investors and for facilitation of keen capital markets (Lowers, Ramsey, Sinason & Strawser, 2007).These acts enforce accountability on accountants to practice integrity when function al for clients and financial institutions by reporting misstatement disclosures in financial statements. As a forensic auditor I collect evidence from companys employees, customers, vendors, and anonymous sources. The sampling tools and techniques used in this investigation consists systematic haphazard selection of entropy from selected sources. The forensic accountant use computer forensics, data analytics and interviews to allow them to assemble much of the required evidence for an investigation.This abuse was sight when we see the invoice of heavy amount paid by end of the last year without any inspection report or haunt completion document in file cabinet. The further investigation showed it was done afterward this year. No employee took any funds to commit financial fraud or larceny but the financial statement were misleading to the users of those statements. A company may experience such type of abuse or subversion schemes developed at any given time, more than one st adium or all over the company.Corruption can be performed by fraudster employees who on purpose and wrongfully use their influence to gain personal financial gain from company business transaction. It can be limited to a particular department or it may exist in all structural levels. It is vital for a company to review financial status routinely to ensure proper accounting and reporting procedures ar followed in aggregate of company business legal proceeding. It is extremely important to review before an end of year transactions with heavy amounts to ensure reasonableity 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 number of days sales in receivable or decline in days purchases in accounts payable. These abnormalities and abuse can be avoided through reviewing acquisitions ledger, general ledger and accounts payable master file to ensure that there are no large or laughable amounts. Also review vendors invoices, receiving reports, purchase orders and purchase requisitions to see that they are valid and are for reasonable amounts.Trace inventory acquisitions to the inventory master file to verify that items recorded as inventory are all valid. Trace receiving reports and vendors invoices to the acquisitions journal to verify that all received goods have been properly recorded. 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 disbursement journal entries to be dated with the date of the check. The cerebrate monthly general ledger summary entries shall carry the date of the month summarized. Procedures that occupy to be imp lemented to ensure that fraudulent processing of vendor invoices does not exists would consist of Only original invoices being processed for payment prudish authorization 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 pool and logged in a register Separation of duty for printing and poster of vendor checks Separation of duty for computer vendor masters listing 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 strong point of internal 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. Refere nces Wells, J. T. (2005). Principles of Fraud Examination. Hoboken, NJ McGraw-Hill. Mulford, C. W. , & Comiskey, E. E. (2002). The Financial Numbers Game. Hoboken, NJ John Wiley & Sons, Inc.