The Essential Laws of Explained

What Accounting Fraud Means And Its Red Flags

Accounting fraud refers to the methods that are employed for the purpose of manipulating the accounting records of an establishment deliberately. 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 be able to see that the salaries that they are getting cannot be sufficient to support the level of the ostentatious life that they are having.

You will know that underground accounting fraud is happening in your organization if there is persistent same patterns when it comes to the figures. When specialists are performing the forensic accounting, this is a misnomer that they encounter all the time.

If you discover that the same staff that is assigned the task of undertaking the reconciliation of the firm’s bank statements is also supposed to sign the cheques, that is a red flag that accounting fraud is being perpetrated. It will be a step in the right direction if those tasks are assigned to different members of staff as their sensitive characteristics can facilitate the perpetration of the fraud.

If you notice that one of your workers possesses a controlling personality over others, you must be skeptical about his real intentions. On the other hand, a secretive nature is part of the attributes that such a person exhibits. 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.

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. Additional you should be skeptical if there is persistent insistence by the accountant to undertake some company’s work at his home. When you are hiring the staff for your finance department, it is advisable to compare accountants to ensure that they have integrity.

Attributed by: anonymous